3SOF

As you know China related stocks have been very hot lately, with good and bad stocks moving up quite sharply. The "China" trademark in the stock market went from seen with skepticism to "I can't miss China's growth". This made Chinese stocks earnings multiple expand from below market average to way above market average, because expectations for growth are naturally higher for China than for the US or the World for that matter.

Since the Chinese economy is growing more than others and expected to keep that way for years to come, it is natural for the market to attach an higher multiple to Chinese stocks than others. Chinese stocks also have huge potential because of the size of the market, 1.3 billion people is a lot of people.

I'm like others, I feel I can't miss on China's growth. But I'm not going to chase high flyers without fundamental backup, I need something more solid to have strong hands. I didn't have to go very far to find one of these stocks, it was right here on my side for weeks, the little video analysis for SDTH:




You can see that I, like others, was a bit skeptical, even though the valuation model said the stock was attractive.

But the thing is the valuation model needs to be updated, because the fundamental outlook improved dramatically when the following press release came out:

• ShengdaTech Begins Construction of New NPCC Factory (http://biz.yahoo.com/prnews/070917/cnm024.html?.v=11)
PR Newswire (Mon, Sep 17)

«Once the second phase of the Xianyang facility is completed, the Company's total NPCC capacity will be 190,000 metric tons, an increase of 111% from a capacity of 90,000 metric tons at the beginning of 2007.»

I see more than 100% revenue growth here, not the 30% I had in my valuation model. If I change the revenue CAGR estimate to 2 and by the way, if I increase the earnings multiple to 20, I get the following results:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=40676;image)

112% share price CAGR would mean SDTH would be the 2nd most attractive stock of the Main Portfolio.

The company already gave a $0.44 EPS guidance for 2007 and analysts see $0.59 EPS for 2008 (http://finance.yahoo.com/q/ae?s=SDTH). But I see a lot more than that, say, about $0.9, that is, roughly double of 2007, since production capacity in 2008 will be more than double of 2007 and the demand seems to absorb  everything they can produce.

With $0.9 EPS in 2008 and a 20 times earnings multiple we're looking at an $18 stock in late 2008, maybe earlier. Longer term, if fundamental trends continue (looking at the company's products, I don't see why not), we could expect even more.

The trading plan is:

Buy SDTH, 6.66% of capital as always.

David I like your SDTH pick OK and bought some of it, but I would like you to take another look at 3 S Bio - SSRX. It was also in the list of Chinese rockets I asked you about the other day. BTW, I meant to thank you for your response, just hadn't got around to it, till now. I know it's not in your favorite sector (medical/genetics), but the sector has been on fire, and SSRX is again on fire today on even bigger volume +1600%.

I'm not entirely sure about the fundamentals myself, and am always a little leery about these recent Chinese IPO's, but IBD rates SSRX with a score of 98 A+, with best in group (out of 30) both overall and fundamentally, and 3rd in group both technically and attractiveness. It may even now move into best in group on the latter two conditions after todays big move. It seems institutions are buying very heavily into it. So if you would take a deeper look, I'd appreciate.

Thanks again David.

Damn, I blinked at the open and my order filled at $7.20... No more blinking for me!! A good pick, David, thanks.  ;)

Quote from: berloga on October 02, 2007, 04:37:52 PM
Damn, I blinked at the open and my order filled at $7.20... No more blinking for me!! A good pick, David, thanks.  ;)

I waited while it ran up, fell back below $6.95 resistance for awhile, and then traded back above $7.00 before I started buying. My average should be about $7.05 or $7.06, a few $'s more than it could have been had for, but better safe than sorry? I believe $6.95 should hopefully provide good support now if I'm not mistaken, whaddaya think?

Quote from: BigSully1 on October 02, 2007, 03:23:19 PM
David I like your SDTH pick OK and bought some of it, but I would like you to take another look at 3 S Bio - SSRX. It was also in the list of Chinese rockets I asked you about the other day. BTW, I meant to thank you for your response, just hadn't got around to it, till now. I know it's not in your favorite sector (medical/genetics), but the sector has been on fire, and SSRX is again on fire today on even bigger volume +1600%.

I'm not entirely sure about the fundamentals myself, and am always a little leery about these recent Chinese IPO's, but IBD rates SSRX with a score of 98 A+, with best in group (out of 30) both overall and fundamentally, and 3rd in group both technically and attractiveness. It may even now move into best in group on the latter two conditions after todays big move. It seems institutions are buying very heavily into it. So if you would take a deeper look, I'd appreciate.

Thanks again David.

David you might just want to put SSRX on the back burner for now. I'm growing increasingly wary of these Chinese crotch rockets right now, especially with U.S. markets at a critical technical tipping point and even though I have much more than my fair share of them. People seem to be buying with little DD and regard to the real fundamentals, as long as it's Chinese, up it goes, and numbers shown on Yahoo and elsewhere are often way incorrect. I'm glad you do your DD on them. Some are getting way overheated and probably way overvalued. It's gotten pretty scary and my hair is beginning to stand on end. The last ones in will get burnt, probably severely. I do believe we're fine with SDTH at this point, for now,  but I intend to lighten up on a few others today, maybe even PGJ. This seemingly irrational behavior could continue for some time to come, but I,m going to start reducing my risk anyway. There's probably still some undervalued/reasonably valued ones out there, but getting harder to find, IMO. Maybe you'll find some more though.

Yesterdays moon shot was CHNR - up 75%, but don't own it. JRJC back near a new high. Others were also up consideraby, but who's looking unless it's up more than 30% in a day?

I'm going to make a different request/suggestion to you later today - not Chinese.

QuoteDavid you might just want to put SSRX on the back burner for now. I'm growing increasingly wary of these Chinese crotch rockets right now, especially with U.S. markets at a critical technical tipping point and even though I have much more than my fair share of them. People seem to be buying with little DD and regard to the real fundamentals, as long as it's Chinese, up it goes, and numbers shown on Yahoo and elsewhere are often way incorrect. I'm glad you do your DD on them. Some are getting way overheated and probably way overvalued. It's gotten pretty scary and my hair is beginning to stand on end. The last ones in will get burnt, probably severely. I do believe we're fine with SDTH at this point, for now,  but I intend to lighten up on a few others today, maybe even PGJ. This seemingly irrational behavior could continue for some time to come, but I,m going to start reducing my risk anyway. There's probably still some undervalued/reasonably valued ones out there, but getting harder to find, IMO. Maybe you'll find some more though.

Wow, SSRX was up 16% yesterday. I see what you mean, the company is now a $325 M market cap company, with just $16 M in revenues in 2006, which means the Price to Sales Ratio is about 20 :o

Anyway, I'm not all that worried about the US stock market for now ... I believe we'll be at new all time highs in the S&P 500 before 2007 closes. And, if Chinese stocks are going for a bubble, it may last several months (I hope not, I hope it blows right away, before there's the possibility of a potential crash damaging the Chinese and World economy).

As for SDTH, there was a lot of volume yesterday ... one could see the selling pressure, or else the stock would have been up 20% plus.

There was an SEC filing out today saying there are 8,312,603 shares for sale (http://www.sec.gov/Archives/edgar/data/1160165/000114420407052415/v089089_posam.htm) (the total number of shares outstanding is 54,095,103, so, not such a big deal in my opinion). And, you know, these are existing shares, not newly issued shares. There are always people buying and selling shares, I'm not concerned about this issue, even though probably there can be some sellers due to this SEC file today (which would be a buying opportunity).

Management talked abut this issue in a recent press release:

«ShengdaTech also confirms that the recent filing to sell 1,830,000 shares of the Company's common stock is by six investors who invested in ShengdaTech prior to the Company going public. These investors are not members of management or related to the management team. The Company confirms that there have been no sales of common stock by officers and directors of ShengdaTech.»

I'm very confident on the revenue growth and profitability side of SDTH, as I see $0.9 EPS in 2008. However I would like to know more about the company's products, which seem like a true innovation in the chemical space. I love Chinese companies which aren't just copies of Western companies, but which can play a unique role in the global economy. Those are truly special and SDTH seems to be one of those.

More over the following updates, I'll keep holding SDTH for the long term.

Wow, SSRX was up 16% yesterday. I see what you mean, the company is now a $325 M market cap company, with just $16 M in revenues in 2006, which means the Price to Sales Ratio is about 20 :o

Anyway, I'm not all that worried about the US stock market for now ... I believe we'll be at new all time highs in the S&P 500 before 2007 closes. And, if Chinese stocks are going for a bubble, it may last several months (I hope not, I hope it blows right away, before there's the possibility of a potential crash damaging the Chinese and World economy).
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[/quote]

Certainly David. SSRX up another 10% today, JRJC at new highs, CHNR up another 70% on top of the 75% yesterday, etc, etc. and probably all way overvalued. I'm all for finding more undervalued Chinese stocks with excellent potential. Maybe we can still find more like SDTH.

Maybe CHCG, CHNG, UTVG ...

DSWL  seems way undervalued.  Hasn't had it's run yet....but it looks ready.

GMKT broke out Tues and and followed through yesterday. Korean ADR though.

I am not sure after LDK decline if its safe to play Chinese stocks but tomorrow it will be interesting to see SDTH holds its ground and EFUT continues its parabolic climb.

QuoteI'm all for finding more undervalued Chinese stocks with excellent potential. Maybe we can still find more like SDTH.

I think I found another with great potential. Will write about it in a moment.

You're giving me too many stocks, I don't have time to cover them all ... some of them are stocks flying a lot, but they don't have fundamental backup in my opinion. I'll try to find one or two stocks which just started rising, not those that already jumped.

Coming back to SDTH, as I was looking at the company's website (English version) (http://www.shengdatech.com/english/about.asp), I found the following:

«The planned production capacity of Shengda Technology Industry Park (Shaanxi Haize Nano Material Co.,Ltd.), which has been invested and built in Shaanxi, is 1 million tons of NPCC per year. The first phase has gone into production smoothly with an annual production of 60,000 tons of NPCC.»

They'll end 2007 with about 190,000 metric tons of production, but you can see they have plans to run it up to 1 million. If the price is maintained, this would represent a 5 fold revenue jump. If net profit margin is also maintained, EPS would be something like $2.2. Apply a 20 times earnings multiple to this and get a $44 stock, not counting on the other products of the company.

Now, the question is, what really is NPCC and can the market absorb 1 million tons of it per year without getting saturated?

I'll study this question over the next update.

Technically, it is clear there are sellers around this $7 area, because with this kind of volume the stock could be up a lot ... when they stop selling I see the stock possibly doubling very rapidly. Another week of this heavy buying and I believe the way will be cleared for the bullish move that I expect.

I'll keep holding SDTH for the long term.

Quote from: David Randolph on October 04, 2007, 06:55:55 AM
Now, the question is, what really is NPCC and can the market absorb 1 million tons of it per year without getting saturated?

I'll study this question over the next update.

I don't think demand will be an issue any time soon  ;)

This is from the transcript of Roth Capital Conference February, 2007:

QuoteNPCC, what is it? What does it do? Why is it important? Essentially, as we have said it's an additive. It's a powdered additive it's used in a wide variety of products. If you are familiar with functional additives, this is different and that it is reduced down to the nano level. Essentially the key raw material is limestone. It's processed through heat pressure, some proprietary processes to the point where it's a very, very fine powder. Each particle is sub-microscopic. In order to qualify as a nano product, each particle has to be refined to less than one-tenth of a micron in size.

Just to give you some perspective on that. One-tenth of a micron is smaller than the wave length of visible light. So it's very, very fine. And that's gives it some great bonding capabilities and allows it to be used in a wide variety of different products.

It does a couple of different things. It enhances durability, strength, heat resistance, stabilization and also reduces the cost of manufacturing by acting as a substitute for some of the more expensive raw materials, for example rubber in tires. There is a growing range of application. We've got four primary markets that we will tell you about. We are just scratching the surface. There is a ton of new applications out there and as we speak, we are in the lab exploring some new applications that are totally different from what we're doing today.

The important thing too from a customer standpoint, there is no investment on their part in terms of capital equipment in order to embed nano precipitated calcium carbonate in their manufacturing process and get all of the benefits out of it.

Four current applications, our largest one is tire manufacture. We are dealing with all of the major manufacturers in China including Triangle Tire. In that application we are the only one in China that is qualified on tires and we maybe the only one in the entire world. We're not 100% sure of that, but we believe we are.

In tire it increases the durability, reduces abrasion loss, increases tensile strength and also reduces the cost of manufacturing. Our customers tell us about 3% to 5%. When you use NPCC in the manufacturing process their cost comes down about 3% to 5%. Again it increases the tire performance by 10% to 20%.

So it's a two pronged benefit in terms of the customer, lower cost of manufacturing, better quality product. Same thing with PVC building materials, these are PVC plastics that are used in construction, window frames, door frames, PVC pipe that's used in plumbing. And I'm sure you are all aware there is a huge growth in construction materials in China. The infrastructure was booming both commercial and residential construction as well as automobile sales. So these two applications were strategically picked because of the growth opportunities that will come just by the growth that's taking place in China today in terms of the economy.

Two of the other current applications paints and coatings and paper. Taking a look at the addressable markets in our four primary markets as you can see, tires for example, from the research that we've looked at. We believe there are about 325 million tires that are manufactured in China today. That number is going to up dramatically as the economy improves and more people can afford automobiles.

So the market size if you take a look at the amount of NPCC that goes in to an average tire it's about $150 million market, less than 10% penetrated today. We have a 100% of the market, because we are the sole provider. We believe the growth rate, and I think these are conservative numbers 8% to 10% a year on tires.

PVC, again about $120 million market today, 15% or so penetrated and again similar growth rates as with the construction boom in China. And paper and paints you can also see. In our current markets there is plenty of room for growth. They are under penetrated and so there are some huge opportunities in our current market.

Our growth strategy going forward; we are going to continue develop applications and add customers and tires, PVC and paper, plus develop some new applications. We've invested in the new R&D facility in Shanghai, and we are going to be building three other ones through out the country to be close to our potential customers.

We are also just starting to expand internationally. We have an agreement with a Dutch in the paper business. We are talking to companies in Thailand, Singapore, and South Korea. So we do plan to aggressively market internationally, once we satisfy the demand in China.

According to this the tire and building material markets alone is 270 million USD. SDTH's revenue from NPCC is around 36 million USD annually so the revenue can grow 750% based only on the demand from these two segments.

Quote from: David Randolph on October 04, 2007, 06:55:55 AM
They'll end 2007 with about 190,000 metric tons of production, but you can see they have plans to run it up to 1 million. If the price is maintained, this would represent a 5 fold revenue jump. If net profit margin is also maintained, EPS would be something like $2.2. Apply a 20 times earnings multiple to this and get a $44 stock, not counting on the other products of the company.

NPCC's gross margin is significantly higher than the chemical business gross margin (41% against 25%) so the net profit margin should increase when they increase the share of revenue coming from NPCC  >:D

I like everything about this stock except that I do not own it but that will change today  :)

It's going to be great to have you on SDTH's board Michael :)

And thanks a lot for answering my question in such a complete way ... it seems that not only the market is there for SDTH's expansion plans, the company also enjoys a position of monopoly.

It seems insiders own 44% of the company, or about 23.8 million shares:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=40760;image)

The stock is not advancing as it so clearly should because there are these 8,312,603 Shares for sale:

Form POS AM (http://www.sec.gov/Archives/edgar/data/1160165/000114420407052415/v089089_posam.htm)

But management didn't sell one share:

«ShengdaTech also confirms that the recent filing to sell 1,830,000 shares of the Company's common stock is by six investors who invested in ShengdaTech prior to the Company going public. These investors are not members of management or related to the management team. The Company confirms that there have been no sales of common stock by officers and directors of ShengdaTech.»

(I just wonder about the difference between 8.3 million and 1.83 million - will check it out over the next update)

The one analyst covering the stock is calling for $0.59 EPS in 2008:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=40761;image)

But I think he's being conservative, because, for example, in Q4 2006, SDTH made $0.11 EPS, with less than half of the production:

«The additional 60,000 metric tons of NPCC capacity is expected to commence production by the end of 2007.

In the same Xianyang City facility, ShengdaTech brought its latest 40,000 metric tons of NPCC capacity online in July 2007. These lines are operating at 80% utilization and are expected to be operating at full capacity by November. Once the second phase of the Xianyang facility is completed, the Company's total NPCC capacity will be 190,000 metric tons, an increase of 111% from a capacity of 90,000 metric tons at the beginning of 2007.»

With 111% more production I expect no less than double the EPS, that is, about $0.88 EPS in 2008.

SDTH, being in a monopolistic position and growing production capacity by more than 100% a year (and sales?), should be trading at least at 20 times earnings, that is, about $17.6 in late 2008 (excluding potential capacity increases in 2008).

I'll keep holding SDTH for the long term.

SSRX made it's debut at #13 and $18.60 on the IBD 100 today.

China Digital TV holding Co., maker of smart cards and TV access control software debuted it's IPO Friday, first day up 75%. Three more Chinese co's plan IPO's this year, look for Fuqi Inernational, - Jewerly,  Noah Education and Longtop Financial technologies.

QuoteSSRX made it's debut at #13 and $18.60 on the IBD 100 today.

hehe, CHME.OB is in the same business as SSRX, sells and profits about double and has 1/10 of the market cap. Talk about market inefficiency.

QuoteChina Digital TV holding Co., maker of smart cards and TV access control software debuted it's IPO Friday, first day up 75%. Three more Chinese co's plan IPO's this year, look for Fuqi Inernational, - Jewerly,  Noah Education and Longtop Financial technologies.

It seems the Chinese supply is increasing ... but demand is even higher. Anyway, over the long term I believe each case is a unique case, there are very overvalued and very undervalued Chinese stocks outthere. I would go with the undervalued ones.

(I'm going to follow your suggestion and create a thread to discuss emerging markets stocks here at the Main Portfolio message board. Thanks).

SDTH is one of those undervalued Chinese stocks, with the special ingredient that it makes a unique product in the entire World, not a copy from the West. NPCC may very well be sold worldwide a few years from now. Management has that long term plan, after they address China's demand, which still seems to be more than 10 times the current supply. That's why SDTH has a 26.6% net profit margin.

I'll keep holding SDTH for the long term.

SDTH isn't rising because some of the following 19 investors are selling their stakes:

«Organization and nature of operations  - On March 2, 1998, a group of 19 investors (referred to herein as the Investors), of which Mr. Chen Xiangzhi (Mr. Chen) holds a controlling interest, formed Shandong Shengda Nano Co., Ltd. (Shengda Nano) under the laws of the People's Republic of China (PRC).»

The CEO of the company and largest shareholder (Mr. Chen Xiangzhi) isn't selling any. Other members of management are also holding on to their shares:

«ShengdaTech also confirms that the recent filing to sell 1,830,000 shares of the Company's common stock is by six investors who invested in ShengdaTech prior to the Company going public. These investors are not members of management or related to the management team. The Company confirms that there have been no sales of common stock by officers and directors of ShengdaTech.»

There are always buyers and sellers, but there's no doubt fundamentals are improving rapidly and that is set to continue:

«The increase of total revenue from our NPCC business was $7,310,663 or 207.84% for the quarter ended June 30, 2007 compared to the corresponding period of the prior year. The increase was mainly due to (i) $7,298,089 additional revenue from an increase in sales by 19,382.50 tons as a result of our capacity expansion, (ii) additional $168,321 from the change of the exchange rate between RMB and USD, which was offset by the $155,747 revenue decrease as a result of the decreased sales price. The average sale price of NPCC for the second quarter of 2007 was $17.34 lower per ton compared to the corresponding period of the prior year. We have a cost advantage due to the adoption of new technology and lower raw materials cost at our Shannxi NPCC facilities. As a result, we sold our products to our customers  at a more competitive price while being able to maintaining our gross profit margin.»

NPCC's demand is soaring and as we've seen in Michael's post, this seems to be just the beginning.

I see $0.9 EPS in 2008 for SDTH (analysts expect $0.59 (http://finance.yahoo.com/q/ae?s=SDTH)), the stock is trading at 7.4 times forward earnings.

I'll continue holding SDTH for the long term.

In at $6.65.  Thanks for the tip.

Hi
I'm also in at $6.45  ...
We could see another good move for the chines stock soon ..

Hi David,

Are SDTH and CHME going to be in the fire portfolio now?

Quote from: buddjas1 on October 09, 2007, 01:24:22 PM
In at $6.65.  Thanks for the tip.

You're welcome buddjas1 :)

Quote from: Garoh on October 09, 2007, 07:27:51 PM
Hi
I'm also in at $6.45  ...
We could see another good move for the chines stock soon ...

Yeah, but I wouldn't put them all in the same bag.

Quote from: tokyopua on October 09, 2007, 08:58:48 PM
Hi David,

Are SDTH and CHME going to be in the fire portfolio now?

No, I think the Fire Portfolio doesn't make much sense in the current context and my investment philosophy, and my plan is to close the Fire Portfolio when it reaches 100% of return. My advice is for anyone investing in stocks to spread his capital across 15 different holdings, no less, and no more than this number.

Going back to SDTH, I see 100% revenue CAGR for the next three years, a 25% net profit margin and a 20 times earnings multiple (excluding any bubble potential) and if these estimates are right the stock should only be sold at $41.24, 514% above where it is now:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=40892;image)

I'll continue holding SDTH for the long term.

Great volume & price explosion. Beautiful 3ML .
Congrats David

Quote from: jorgegr on October 10, 2007, 01:22:34 PM
Great volume & price explosion. Beautiful 3ML .
Congrats David

Yes congratulation to David - On a downday the 3SOF port is up 1.45%. Stellar performance  :D

BAMM!!! With authority BABY!  SDTH just broke past its all time high of $8.25 >:D >:D

Congrat David, I missed the bang but am happy to see 3SoF punch the hell out of market. Like Tyson hitting Wall St.

Hmm. Kind of a disappointing reversal in the markets today. Probably just setting the bears up for a bigger kill, but I think SDTH was going down today regardless of what the market did.

Sorry to burst anyone's bubble  >:D here and I'm not going to be popular for saying this, but I sold most of my SDTH today. I already had  concerns about it and intended to sell some, but after this came out I decided to sell most today if only temporarily.

http://www.forbes.com/2007/10/11/shengda-tech-nanotechnology-markets-equity-cx_vk_1011markets04.html?partner=yahootix

The stock does appear  undervalued for growth, but I don't believe NPCC is exclusive at all to SDTH. So I have some questions. Maybe the process by which they claim they can produce it cheaper is exclusive and patented, but not NPCC itself. Is it really any cheaper or better than other processes? Is it actually used to enhance other products, or is it just used as a substitute (cheap) filler in other products like rubber, paper, plastics, etc. Is there a real barrier to entry here? After all limestone is one of the most plentiful substances in the world.

Early insiders selling, costs of coal (their other chemicals), how are they paying for the expansion, big short interest, I think it was/is on the reg SHO list, and Nano-hype.  Anyway I'm not trying to bash, just voicing concerns, and maybe David or others can look deeper and put some concerns to rest. Until then I will have to remain a trader and not an investor in SDTH.

I would also watch the A/R and aging. We wouldn't want to see this (or any others) become another Bodisen Biotech where they were sellin "exclusive and patented" bull sh*t ---- literally. Anyone know whatever happened to them anyway?

Here is an early filing if anyone interested;

I think you made a mistake selling SDTH.
This stock reminds me of GIGM a month or so ago.
Too cheap and high China Growth!
I agree with you on this point:
"Probably just setting the bears up for a bigger kill"
We might be in one of the biggest bull markets we have seen since the dot com era.
Just my opinion of course :-)

Quote from: BigSully1 on October 11, 2007, 05:03:15 PM
Hmm. Kind of a disappointing reversal in the markets today. Probably just setting the bears up for a bigger kill, but I think SDTH was going down today regardless of what the market did.

Sorry to burst anyone's bubble  >:D here and I'm not going to be popular for saying this, but I sold most of my SDTH today. I already had  concerns about it and intended to sell some, but after this came out I decided to sell most today if only temporarily.

http://www.forbes.com/2007/10/11/shengda-tech-nanotechnology-markets-equity-cx_vk_1011markets04.html?partner=yahootix

The stock does appear  undervalued for growth, but I don't believe NPCC is exclusive at all to SDTH. So I have some questions. Maybe the process by which they claim they can produce it cheaper is exclusive and patented, but not NPCC itself. Is it really any cheaper or better than other processes? Is it actually used to enhance other products, or is it just used as a substitute (cheap) filler in other products like rubber, paper, plastics, etc. Is there a real barrier to entry here? After all limestone is one of the most plentiful substances in the world.

Early insiders selling, costs of coal (their other chemicals), how are they paying for the expansion, big short interest, I think it was/is on the reg SHO list, and Nano-hype.  Anyway I'm not trying to bash, just voicing concerns, and maybe David or others can look deeper and put some concerns to rest. Until then I will have to remain a trader and not an investor in SDTH.

I would also watch the A/R and aging. We wouldn't want to see this (or any others) become another Bodisen Biotech where they were sellin "exclusive and patented" bull sh*t ---- literally. Anyone know whatever happened to them anyway?

Here is an early filing if anyone interested;

BigSully1 congrats....I sold some this morning as well.   :)

We can always buy back. ;)

Quote from: wxmang on October 11, 2007, 05:48:52 PM
I think you made a mistake selling SDTH.
This stock reminds me of GIGM a month or so ago.
Too cheap and high China Growth!
I agree with you on this point:
"Probably just setting the bears up for a bigger kill"
We might be in one of the biggest bull markets we have seen since the dot com era.
Just my opinion of course :-)

The difference between GIGM and SDTH, at least for me, is that GIGM has "proven" itself and SDTH has not. Therefore I treat GIGM like a great investment and SDTH mostly like a trade until such time that SDTH proves itself. I'm not just picking on SDTH, there are many others that buyers should be asking questions on and are not, they are just buying anything Chinese that looks like it's breathing.  Most of those I'm also treating like trades. You can bet at least some will be very disappointed, sooner or later.

It could be that by the time SDTH proves itself to me, it will be much higher. If thats the case, then I will still have some holding to add to. I rarely sell all of anything I buy. Anyway, I'm not trying to argue whether SDTH is a good investment or not, because right now, I just don't know, Just bringing up what I think are legit concerns, because after all, David and the portfolio is now about investment for the LT and not just trades, aren't they?

Congrats to you Kslifka also. You're really staying on top of the China trades aren't you? Keep up the good work.

QuoteHmm. Kind of a disappointing reversal in the markets today.

I believe it is just filling the gap at $154.26 on the SPY, normal market behavior.

QuoteSorry to burst anyone's bubble >:D here and I'm not going to be popular for saying this, but I sold most of my SDTH today. I already had  concerns about it and intended to sell some, but after this came out I decided to sell most today if only temporarily.

No problem BigSully1, always nice to read different opinions.

Now, this article from Forbes (http://www.forbes.com/2007/10/11/shengda-tech-nanotechnology-markets-equity-cx_vk_1011markets04.html?partner=yahootix), at least to me, is a joke, the author didn't do his homework on the company:

«Nanotechnology takes place on a scale difficult to envision, and the surge of Shengda Tech is similarly inconceivable. The tech stock saw its market capitalization inflated to $454 million after the share price grew 136% since May.»

What's "inconceivable" about trading at $7.69/$0.59 = 13 times 2008 EPS estimates (http://finance.yahoo.com/q/ae?s=SDTH)?

I actually believe this $0.59 EPS estimate is way too conservative, because there's absolute evidence that revenue will more than double in 2008 when compared to 2007, simply because:

«Once the second phase of the Xianyang facility is completed, the Company's total NPCC capacity will be 190,000 metric tons, an increase of 111% from a capacity of 90,000 metric tons at the beginning of 2007.»

Over the medium term the plan is to increase capacity to 1 million tons a year:

«The planned production capacity of Shengda Technology Industry Park (Shaanxi Haize Nano Material Co.,Ltd.), which has been invested and built in Shaanxi, is 1 million tons of NPCC per year.»

QuoteThe stock does appear  undervalued for growth, but I don't believe NPCC is exclusive at all to SDTH. So I have some questions. Maybe the process by which they claim they can produce it cheaper is exclusive and patented, but not NPCC itself. Is it really any cheaper or better than other processes? Is it actually used to enhance other products, or is it just used as a substitute (cheap) filler in other products like rubber, paper, plastics, etc. Is there a real barrier to entry here? After all limestone is one of the most plentiful substances in the world.

Rubber is a natural and expensive product. It's supply can't keep up with the worldwide growth in demand for tires:

«It does a couple of different things. It enhances durability, strength, heat resistance, stabilization and also reduces the cost of manufacturing by acting as a substitute for some of the more expensive raw materials, for example rubber in tires. There is a growing range of application. We've got four primary markets that we will tell you about. We are just scratching the surface. There is a ton of new applications out there and as we speak, we are in the lab exploring some new applications that are totally different from what we're doing today.»

«Four current applications, our largest one is tire manufacture. We are dealing with all of the major manufacturers in China including Triangle Tire. In that application we are the only one in China that is qualified on tires and we maybe the only one in the entire world. We're not 100% sure of that, but we believe we are.»

Your post has many more interesting questions BigSully1, so I'll come back to it over the following updates.

I remain a believer that SDTH will earn at least $0.9 EPS in 2008 and that should put the stock in the $18 area. I don't trade, just invest - can't lose my position. Anyway, good luck with your short term trades :)

I'll continue holding SDTH for the long term.

Here is one guys opinion, for what it's worth, can't say I agree with all of it, especially the part about "should only trade at 5 to 7 times earnings"   

I'd really like to understand the reasoning behind that statement, but there is none offered.

I'm just the messenger here guys. Don't shoot me :-\

http://seekingalpha.com/article/49104-hot-china-stocks-a-bubble-to-avoid?source=yahoo

Quote from: BigSully1 on October 12, 2007, 10:58:25 AM
Here is one guys opinion, for what it's worth, can't say I agree with all of it, especially the part about "should only trade at 5 to 7 times earnings"   

I'd really like to understand the reasoning behind that statement, but there is none offered.

I'm just the messenger here guys. Don't shoot me :-\

http://seekingalpha.com/article/49104-hot-china-stocks-a-bubble-to-avoid?source=yahoo

Ok messenger, don't worry about being shot ;D

But the author of the message you bring, putting JRJC, trading at 96 times earnings (http://finance.yahoo.com/q/ae?s=JRJC), and SDTH, trading at 17 times earnings (http://finance.yahoo.com/q/ae?s=sdth), in the same bag, just because they both entered the market as reverse mergers, doesn't deserve my reverence as a financial analyst. 

Thanks anyway :)

Do you think that gap on SPY at $154 is really significant enough to be filled?

Quote from: kpunarc on October 12, 2007, 11:37:39 AM
Do you think that gap on SPY at $154 is really significant enough to be filled?

Yeah, probably, this morning's rally is a short covering move to touch the midpoint of yesterday's red candle's body, which was $156.2 (today's high so far = $156.18). This is bearish short term technical action. Probably there's going to be a sell off in the afternoon to close that gap. But I wouldn't try to time the market, the long term trend is bullish, good luck :)

China and coal

http://www.iht.com/articles/2007/04/16/bloomberg/bxinvest.php

Quote from: BigSully1 on October 12, 2007, 02:46:09 PM
China and coal

http://www.iht.com/articles/2007/04/16/bloomberg/bxinvest.php

This is why I've invested  on YZC as I mentioned it in another thread

Quote from: jorgegr on October 12, 2007, 03:02:39 PM

Quote from: BigSully1 on October 12, 2007, 02:46:09 PM
China and coal

http://www.iht.com/articles/2007/04/16/bloomberg/bxinvest.php

This is why I've invested  on YZC as I mentioned it in another thread

That was a good investment decision Jorge, but the relevance of why I posted the article here is the following from an SDTH filing. Just something to think about..

"The cost of our raw materials fluctuates significantly, which may adversely impact our profit margin and financial position. Both our NPCC and chemical businesses use coal as raw material. In the last two years, coal prices have fluctuated substantially. Although the price for coal dropped last year, it may go up again in the future due to the rapid development of the Chinese economy and the resulting huge demand for energy. If the price for coal increases again, our profit margin could decrease considerably."

Thank you for the explanation and your permanent good work.

Thank you much Jorge, for your good work. Coincidentally, it was you, that first brought my attention to the situation with coal in China several months ago.. I already own some YZC, indirectly though, through PGJ and FXI.

I dont know enough honestly to comment on the whole coal issue, but just looking at the chart I still think this one has legs for at the very least the short term.  Usually I dont like seeing dark cloud cover with such big down volume, but yesterday's close was OK, formed a doji harami, and it looks like a reversal day could happen Monday and then yet another explosive Gspot breakout waiting to happen with a close above 9.04   ;)

Coal and India

http://www.platts.com/Coal/highlights/2007/coalp_icr_091107.xml

QuoteThat was a good investment decision Jorge, but the relevance of why I posted the article here is the following from an SDTH filing. Just something to think about..

"The cost of our raw materials fluctuates significantly, which may adversely impact our profit margin and financial position. Both our NPCC and chemical businesses use coal as raw material. In the last two years, coal prices have fluctuated substantially. Although the price for coal dropped last year, it may go up again in the future due to the rapid development of the Chinese economy and the resulting huge demand for energy. If the price for coal increases again, our profit margin could decrease considerably."

This is an interesting and valuable information BigSully1, thanks :)

I think that SDTH, being the sole provider of NPCC to the tire industry in China, has pricing power to reflect the change in coal prices in NPCC prices. Anyway, I was already factoring in a small decrease in net profit margin, from the current 26.6% to 25%. Let's cut this some more to 20%:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41025;image)

The optimal selling price declined from $41 to $33. No big deal, for a stock currently trading at $7.79. Do you think I should cut net profit margin estimate some more? I think it is appropriate this way. Moreover, if Coal prices are set to rise due to strong economic growth, what to think of NPCC's substitute, rubber? It will probably rise even more, increasing SDTH's pricing power ...

My main worry on SDTH is the following:

«3) authorized the issuance of 10,000,000 shares of preferred stock, $0.00001 par value. The shares of preferred stock may be issued in one or more series and may be granted voting rights, at the discretion of the Company's board of directors.»

This power to create preferred shares is a worry for any common shareholder like I am, because preferred shares can take out the value of common shares. I wonder if it is written somewhere (perhaps in the company's articles of incorporation?) the conditions and the shape of a possible issuance of preferred shares. I'll study this for the upcoming updates and I'll be interested in reading opinions on the subject (or any other subjects).

But fundamentally and without any trick from management I see much higher prices coming for SDTH and I'll keep on holding SDTH for the long term.

I've been looking for a natural rubber market chart but still couldn't find one. I guess that like most natural resources, rubber has been in high demand and its price has been up. Just think of the worldwide production of tires ... remember when miners couldn't mine because they didn't have enough tires for their big trucks and machines?

NPCC seems to be the right answer at the right time. With hundreds of millions of people about to own cars for the first time, the tires can't continue to be made out of natural rubber.

Anyway, it is easy to see $0.9 EPS in 2008 for SDTH and there's no way the stock will be under $15 if that materializes (unless that preferred shares issue ...).

I'll continue holding SDTH for the long term.

Natural rubber and Rubber Index futures are traded on the Osaka Mercantile Exchange (OME). The OME's natural rubber contract is based on the RSS3 ribbed smoked sheet No. 3 while the Rubber Index Futures Contract is based on a composite of 8 component grades from 6 component rubber markets in the world. Rubber futures are also traded on the Shanghai Futures Exchange (SHFE) and the Tokyo Commodity Exchange (TOCOM).

http://www2.barchart.com/comfund/rubber.asp (http://www2.barchart.com/comfund/rubber.asp)


Click on the little charts:
http://www.csidata.com/cgi-bin/GetChartsForGroup.pl?group=WD-RUB (http://www.csidata.com/cgi-bin/GetChartsForGroup.pl?group=WD-RUB)

Quote from: Se7en on October 16, 2007, 08:58:58 AM
Natural rubber and Rubber Index futures are traded on the Osaka Mercantile Exchange (OME). The OME's natural rubber contract is based on the RSS3 ribbed smoked sheet No. 3 while the Rubber Index Futures Contract is based on a composite of 8 component grades from 6 component rubber markets in the world. Rubber futures are also traded on the Shanghai Futures Exchange (SHFE) and the Tokyo Commodity Exchange (TOCOM).

http://www2.barchart.com/comfund/rubber.asp (http://www2.barchart.com/comfund/rubber.asp)


Click on the little charts:
http://www.csidata.com/cgi-bin/GetChartsForGroup.pl?group=WD-RUB (http://www.csidata.com/cgi-bin/GetChartsForGroup.pl?group=WD-RUB)

Thanks for the awesome information Se7en :)

I put that second link on my favorites, now I know where to check the rubber market. As expected, it is in a long term bull market, more than doubling over the past two years.

China and India combined have 2.5 billion people. In China, car and truck sales soared 74% in 2006 alone :o (of course, still coming up from a small base). Here's an article on the subject:

China's Booming Car Market Defies Pundits (http://www.businessweek.com/globalbiz/content/jul2006/gb20060711_947833.htm?chan=autos_autos+index+page_news)

There's no doubt demand for tires will rise a lot over the World, especially in China. Natural rubber is going up a lot in price and NPCC is a good substitute for the material and SDTH is the sole provider, a company in a monopolistic situation.

If I agree that coal prices may go up, I don't think SDTH will have trouble in increasing NPCC prices so that it can keep a 20%-25% net profit margin. Tire prices for the end consumer will also move up.

I see $0.9 EPS for 2008 and that should put the stock at least at $18. But if we consider the multiples some other Chinese stocks have been trading ... it can be a lot more.

I'll continue holding SDTH for the long term, with confidence.

The Chinese don't know how to value stocks, and that's the only explanation I have to why SDTH doesn't fly much higher right away. Warrants holders have been converting warrants into common shares and selling them in this area, keeping the stock deeply undervalued.

But, because the stock is undervalued, I'm positive that demand will outstrip supply. When we get over with these warrants SDTH will most likely rise by 100% quickly.

I'll continue holding SDTH for the long term.

Quote from: David Randolph on October 19, 2007, 08:50:22 AM
The Chinese don't know how to value stocks, and that's the only explanation I have to why SDTH doesn't fly much higher right away. Warrants holders have been converting warrants into common shares and selling them in this area, keeping the stock deeply undervalued.

But, because the stock is undervalued, I'm positive that demand will outstrip supply. When we get over with these warrants SDTH will most likely rise by 100% quickly.

I'll continue holding SDTH for the long term.

I remember AOB got bogged down by warrant selling pressure about 2 years ago too.  Look at it now, and that was one of your early picks as well!

QuoteI remember AOB got bogged down by warrant selling pressure about 2 years ago too.  Look at it now, and that was one of your early picks as well!

Yeah, but back then I knew little to nothing about fundamental analysis, or else I would have held AOB longer. It was obvious the stock was worth a lot more, just looking at the fundamentals.

SDTH is a similar situation from a fundamental standpoint, a profitable Chinese company undervalued and growing strongly. But this time I know how to recognize this type of stocks and have the confidence and patience to hold for the long term (say, 3 years?) and probably reap the reward of several bags of profits.

One thing I'm absolutely sure: I won't be shaken out by technical factors, or by minor fundamental information. I'll remain focused on major fundamental trends, in terms of revenues and EPS, the main factors moving stock prices over the long run.

I'll keep holding SDTH for the long term.

 
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Heard on the Street Heard in Europe Heard in Asia All Heard
 
Big Interest in China Small Caps
As Allure Grows,
Lack of Research
Adds to Volatility
By DENIS MCMAHON
October 22, 2007; Page C6

SHANGHAI -- There's a lot of interest these days in small Chinese companies listed in the U.S., but not a lot of information about them.

To plug that gap, foreign research firms are expanding their China-based teams. The trend could improve the liquidity of the roughly 180 such small-capitalization stocks. Ultimately, it could narrow not only the information gap but also a valuation gap between these small-cap stocks and their mid- and large-cap Chinese cousins trading in the U.S.

The research deficit has exacerbated the volatility of these stocks, which have a market value of less than $1 billion, and their susceptibility to market talk, especially on the over-the-counter Bulletin Board. More research could temper some of that volatility.

Brokerages setting up in China to cover companies listed in the U.S. "are not about to pull up stakes and move on. It is not a fad," says Mark Fleischhauer, a portfolio manager in Hong Kong for Jayhawk Capital Management, which invests in China and uses research reports. "It is hard for Chinanot to become the biggest economy in the world, and you need to be there as an investor."

The U.S. listings of Chinese small-cap stocks can be found on the New York Stock Exchange, the Nasdaq Stock Market, on the OTC Bulletin Board and through the Pink Sheets quotation system. The biggest numbers are on Nasdaq and the OTC market.

Wall Street analysts who cover China's big companies, which typically employ English-speaking, Western-educated executives, tend to be based in the U.S. or Hong Kong, with the occasional trip to mainland China. For covering China's small caps, the picture is different.

"At a lot of these companies, there is no English-speaking member of management," says Gordon McBean, director of international research at Roth Capital Partners of Newport Beach, California, which set up a team of 10 Chinese analysts in Shanghai this year. "Even if there is, it's not a good idea to talk just with CEOs and CFOs."

The firm's research includes talking with suppliers, customers and industry associations, all of which needs to be done on the ground, Mr. McBean says. Roth's reports also include information on related-party transactions, capital structure and significant shareholders, Sarbanes-Oxley compliance and how the company communicates with shareholders.

The stepped-up research seems to be helping trading volume. Yucheng Technologies, a Nasdaq-listed provider of IT services to China's banking sector, has an average daily trading volume of 86,000 shares, up from 26,300 when Roth initiated coverage in April, according to the investment bank. ShengdaTech, a specialty-chemical maker on the OTC Bulletin Board, has seen daily trading volume increase to 276,000 shares from 5,200 when Roth starting covering the firm, then known as Zeolite, in December.

Of course, opening an office in China isn't without problems. "The biggest challenge in setting up a China team is undoubtedly finding personnel," Mr. McBean says. "Hiring bilingual, bicultural, Wall Street-savvy folks is not easy." And the China Securities Regulatory Commission has strict guidelines for foreign brokers wanting to open an office. Roth took nine months to navigate the process.

Some firms think it's not necessary to put in China the bulk of their analysts assessing the country's companies. Minneapolis brokerage Piper Jaffray, for instance, has just the one analyst in Shanghai and keeps the rest in the U.S.

"You need to be in close contact with the investors here [in the U.S.] to give them the information they need to make informed decisions," says Joel Denney, Piper Jaffray's head of investment research. "Given the time difference, it makes it difficult if you're trying to market to U.S. investors and you're based in China."

Nonetheless, the firm has a support team of consultants in Shanghai to help its 15 U.S.-based analysts. (A 16th analyst was transferred to Shanghai earlier this year.) Mr. Denney says he expects China-based staff to do more research in the future. Consultants help analysts by arranging interviews and gathering data.


Investor interest in U.S.-listed Chinese small caps as a play on the China growth story isn't surprising. Mr. McBean estimates that per-share earnings for these stocks as a group has risen about 26% over the past three years. The expected three-year EPS growth for the 17 Chinese companies that Roth now covers is 37%. By contrast, Mr. McBean says, the broad U.S. markets are probably seeing EPS growth around 10% or so.

The valuation of one Chinese small cap in the U.S., China Fire & Security Group, rose after it moved in July to Nasdaq from the OTC Bulletin Board. The company, which makes industrial fire-safety products, has a market cap of $317 million. Based on Thomson's average of three analyst estimates, China Fire trades at 24 times its projected 2007 earnings. Before the move to Nasdaq, according to Roth, it traded at 13.4 times 2007 earnings.

Firms such as Roth and New York-based Brean Murray Carret say their research is expanding interest in Chinese small caps. "The appetite for these types of stock ideas has grown dramatically in the U.S.," says David Dunn, managing director of Brean Murray, referring to companies with market capitalization of $75 million to $750 million, the firm's target range.

"When we first started," he says, "there were maybe 40 to 50 companies in that range, with virtually no coverage." Brean Murray now covers about 35 Chinese companies and has six analysts in Beijing, up from two when it opened the office in March 2006. The firm doesn't sell its research reports but uses them to generate brokerage and investment-banking business.

Roth, which generates reports for sale, expects to be covering the same number of companies as Brean Murray by the end of the year. It now covers 17 companies, including American Dairy, which produces milk powder, and wire manufacturer Fushi International.

Write to Denis McMahon at [email protected]

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Thanks for the interesting article soxguy :)

SDTH has been beating analysts projections:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41269;image)

In 2006 the second half of the year was much stronger than the first half, since the company reported $0.06 EPS in the 1st half and $0.20 EPS in the second. In 2007, the 1st half EPS was $0.21, so the 2nd half ... perhaps it can bring us $0.30 EPS?

That would put the full year 2007 EPS at $0.51, above the $0.45 expected and closer to the 2008 estimate (which I believe is way too conservative) of $0.59 EPS.

I'm eager for SDTH's 3rd quarter earnings results, which will probably be announced before November 15.

I'll continue holding SDTH for the long term. 

It's a good thing that volume in SDTH's shares has been high (719,200 shares traded yesterday, which means about $5.8 M), because this helps to dry supply coming from early investors selling.

Fundamentally I have no doubts the stock is worth a lot more, so this is just a matter of patiently waiting for the supply to dry and the stock will surely go up.

I'll continue holding SDTH for the long term.

Hi David

SDTH are expected to release Q3 earnings on november 4.

Estimates are $ 0.11 per share.
Have You considered the risk of holding the stock during earnings release?

Anders

Quote from: Thyme on October 26, 2007, 10:03:49 AM
Hi David

SDTH are expected to release Q3 earnings on november 4.

Estimates are $ 0.11 per share.
Have You considered the risk of holding the stock during earnings release?

Anders

Hi Thyme, thanks for your question :)

I would call it the opportunity of holding the stock through earnings. Since production more than doubled since the beginning of the year, I can only assume SDTH will earn more than what it did in Q4 2006, when it earned 11 cents per share:

«In the same Xianyang City facility, ShengdaTech brought its latest 40,000 metric tons of NPCC capacity online in July 2007. These lines are operating at 80% utilization and are expected to be operating at full capacity by November. Once the second phase of the Xianyang facility is completed, the Company's total NPCC capacity will be 190,000 metric tons, an increase of 111% from a capacity of 90,000 metric tons at the beginning of 2007.»

More production capacity meant more revenues and profits in the recent past:

«Revenue from the NPCC segment was $10.8 million for the second quarter 2007, up 207.8% from $3.5 million in the second quarter of 2006. The large year-over-year revenue growth is due to the addition of the new Xi'an, NPCC facility in Shaanxi Province, in September 2006 with 60,000 metric tons of NPCC capacity. On a sequential basis, revenue from the NPCC segment increased 20.6% from the first quarter of 2007. The sequential increase was derived from a 21% increase in volume, to 28,029 metric tons of NPCC sold from 23,164 metric tons of NPCC sold in the first quarter of 2007. NPCC for use in the production of tires and PVC remained the largest contributors to revenue representing 51.4% and 34.4% of total NPCC revenue, respectively. NPCC for use in latex and adhesives applications experienced the strongest growth in the second quarter of 2007, up 263.9% quarter-over-quarter, representing 8.5% of NPCC revenue compared to 2.8% of NPCC revenue in the first quarter of 2007. NPCC for use in printing ink and paints accounted for 5.7% of revenue in the second quarter of 2007.»

Also notice the growth of revenues coming from NPCC's use in latex and adhesives applications, in just one quarter :o

I'll continue holding SDTH for the long term.

SDTH's chart is getting more constructive. I guess the high volume has been absorbing the shares coming from the warrants conversion, which seems to be ending. When it does end I see SDTH flying towards $10-$12 a share over the short term.

Over the long term my valuation model says SDTH should only be sold around $33 a share (http://www.3stocksonfire.org/fundamental.model.php?ticker=SDTH&portfolio=main), given its current fundamental trends.

I'll continue holding SDTH for the long term.

Nothing new on SDTH, I'll keep holding the stock for the long term.

SDTH went down 8% yesterday simply because it was up 100% plus over the prior 6 weeks. But, according to my estimates (http://www.3stocksonfire.org/fundamental.model.php?ticker=SDTH&portfolio=main), the company's fundamental value is much higher, so I'll keep holding SDTH for the long term.

At last SDTH's 3rd quarter results are coming:

• ShengdaTech Schedules Conference Call to Discuss Third Quarter 2007 Results (http://biz.yahoo.com/prnews/071105/cnm024.html?.v=13)
PR Newswire (Mon 8:00am)

More information can only make SDTH rise, since the last piece of information in Yahoo Finance was this misleading and erroneous article:

• Shengda Tech: A Nanotech-Scale Bubble? (http://us.rd.yahoo.com/finance/external/forbes/SIG=136h37n51/*http://www.forbes.com/2007/10/11/shengda-tech-nanotechnology-markets-equity-cx_vk_1011markets04.html?partner=yahootix)
at Forbes.com (Thu, Oct 11)

I'll keep holding SDTH for the long term.

On one hand this market is healthy because it isn't letting speculative bubbles get out of hand, on the other hand, in SDTH's specific case, it is unable to see beyond the macro story.

SDTH went sharply up on October 10th simply because it was a Chinese stock, and on October 11th it fell back down because of a "bubble warning" in the Forbes magazine covering the stock.

Both trading ideas are wrong, in my view.

Investors should look beyond SDTH being a Chinese company or not, and take an in depth look at the company's products and its fundamental trends. Then they would clearly see SDTH is worth more than triple of its current market value.

Fortunately 3rd quarter earnings will be released next Monday and hopefully that will shed some light into the company's intrinsic business and its value.

I'll keep holding SDTH for the long term.

Just three days to go for SDTH's 3rd quarter earnings release. No doubt I'll hold through them.

SDTH almost touched its ascending 50 days SMA today, and we know how that's usually a sweet spot to buy fundamentally attractive stocks for the long term.

Today is the last day to sell before the earnings release on Monday morning, but I'll naturally hold through earnings, not only because I expect SDTH to beat expectations of $0.11 EPS for the quarter, but also because the stock is cheap from an earnings multiple perspective, given its growth rate.

I also expect the earnings release to clarify investors, because they've been bombarded by misleading information on SDTH, specifically from Forbes magazine, which called SDHT a "nanotech  bubble stock".

I'll keep holding SDTH for the long term.

Form 10-Q for SHENGDATECH, INC.


--------------------------------------------------------------------------------

9-Nov-2007

Quarterly Report



ITEM 2-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the financial statements and related notes and the other financial information appearing elsewhere in this quarterly report on Form 10Q. This discussion and analysis contains forward-looking statements that involve risk, uncertainties and assumptions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including those identified below, in "Risk Factors" and elsewhere in this quarterly report.


Overview
We are a leading manufacturer and supplier of NPCC for tires, plastics, paints, inks, papers and other products in China. We are selling our NPCC products mainly to tire and plastics manufacturers in northern China and recently into the international market. We also manufacture coal-based chemicals including ammonia bicarbonate, liquid ammonia, methanol and melamine. Our coal-based chemicals are delivered directly to our customers or through distributors in Shandong Province, China.

Reorganization

We were organized as a Nevada corporation on May 11, 2001 under the name Zeolite Exploration Company for the purpose of acquiring, exploring and developing mineral properties. We conducted no material operations from the date of our organization until March 2006. On March 31, 2006, we consummated a share exchange pursuant to a Securities Purchase Agreement and Plan of Reorganization with Faith Bloom Limited, a British Virgin Islands company, and its stockholders. As a result of the share exchange, we acquired all of the issued and outstanding capital stock of Faith Bloom in exchange for a total of 50,957,603 shares of our common stock. The share exchange is accounted for as a recapitalization of Zeolite and resulted in a change in our fiscal year end from July 31 to December 31. Faith Bloom Limited is deemed to be the accounting acquiring entity in the share exchange and, accordingly, the financial information included in this prospectus reflects the operations of Faith Bloom, as if Faith Bloom had acquired us.

Faith Bloom was organized on November 15, 2005 for the purpose of acquiring from Eastern Nanomaterials Pte. Ltd., a Singapore corporation, all of the capital shares of Shandong Haize Nanomaterials Co., Ltd and Shandong Bangsheng Chemical Co., Ltd., which are Chinese corporations engaged in the manufacture, marketing and sales of a variety of nano precipitated carbonated calcium ("NPCC") products and coal based chemicals for use in various applications. On December 31, 2005, Faith Bloom acquired all of the capital shares of Shandong Haize Nanomaterials Co., Ltd and Shandong Bangsheng Chemical Co., Ltd.

As a result of the transactions described above, Shandong Haize Nanomaterials Co., Ltd and Shandong Bangsheng Chemical Co., Ltd. are wholly-owned subsidiaries of Faith Bloom, and Faith Bloom is a wholly-owned subsidiary of Zeolite. On April 4, 2006, Faith Bloom formed a wholly-owned subsidiary in Shaanxi, China to run the new NPCC facility in Shaanxi. Effective January 3, 2006, Zeolite changed its name to ShengdaTech, Inc. Our corporate structure is depicted in the following chart:

[[Image Removed]]



--------------------------------------------------------------------------------

Revenue

We derive our revenues from two segments: NPCC and coal-based chemicals. The most significant factors that directly or indirectly affect our revenues are as follows:

manufacturing capacity of NPCC;
pricing of our NPCC; and
industry demand.

Manufacturing Capacity of NPCC. Our manufacturing capacity of NPCC products has been 30,000 metric tons annually from April, 2003. Sufficient capacity ensures a stable supply of NPCC for our customers which typically have a large demand for NPCC. We increased our annual manufacturing capacity of NPCC to 90,000 metric tons as of December 31, 2006 and 130,000 metric tons as of September 30, 2007. We plan to add an additional 60,000 metric tons of capacity in 2007.

Pricing of our NPCC product. The pricing of NPCC products is generally determined by competition, demand, market conditions, the value brought to customers, the Company's margin targets, and other market factors. The more we manufacture, the lower our cost and more competitive the price of NPCC at which we can sell to customers. For example, with respect to tire and PVC building materials, the pricing of NPCC products is principally affected by the cost saving benefit our customers realize by replacing some of the relatively expensive carbon black and PVC. With respect to paper, the pricing of NPCC is principally affected by comparable imports. In the next few years, we may reduce the selling price in order to compete with relatively small competitors. However, we still remain confident in retaining the current gross profit margin level because our unit costs of products are reduced by achieving economies of scale.

Industry demand. Our business and revenue growth depends on the industry demand of NPCC. The downstream industries we supply are tire, PVC building rubber, paints and oil ink. Given the difference between the overall demands of those industries, our growing R&D capacity and the quantity we currently supply to our customers, we believe in the growth potential of our business.

Our ammonia-based chemicals supply local farmers and chemical plants located in Shandong and other surrounding provinces. We have a good relationship with our customers and our products have a good reputation in their markets. We believe the demand for our coal-based chemicals will remain stable in the next few years. But our chemical factory is located in the residential district. With the strong China governmental security and environment protection standards, it is possible the government will order us to shut down the factory or move to another location. As of September 30, 2007, we haven't received any such order or notice from the government.

Seasonality. Our chemical business is generally the busiest between February and November of each year, when our ammonium bicarbonate is in the most demand due to the farming season in northern China. Our chemical revenue from this season generally accounts for 70-80% of the total chemical revenue per year. December to January is typically our slowest period during which the price of our ammonium bicarbonate drops approximately 6-8%.



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Cost of Revenue
Cost of revenue for both NPCC and chemicals consists primarily of (a) consumption of raw materials and auxiliary raw materials (b) use of water and electricity (c) machinery's depreciation and (d) workers' salaries.

The most significant factors that directly or indirectly affect our cost of revenues are as follows:

processing technologies of NPCC; and
availability and price of coal.

Process technologies of NPCC. The advancement of NPCC processing technologies is crucial in order to deliver value to our clients. We have successfully completed the research of a new generation membrane-dispersion technology in conjunction with Tsinghua University. The technology has been verified by experts and is in the process of becoming patented. The Company and Tsinghua University each have 50% ownership of the technology and the Company has the exclusive (100%) right to use the technology. This new technology will enable us to produce NPCC in a more efficient and cost effective way.

Availability and Price of Coal. Coal is the key raw material for making our coal-based chemicals as well as the key fuel for calcination of limestone. We have long-term relationships with our coal suppliers. We have developed a network of supplier alternatives for backup purposes. Coal prices have fluctuated in the past few years and the price curve turned relatively flat in the second half of 2005. The average price of coal was approximately $70 per metric ton in 2004 and increased to approximately $80 per metric ton in 2005 and $90 in 2006. In the third quarter of 2007, it was approximately $85 per metric ton.

Gross Profit

Our gross profit has been, and will be, affected by many factors, including (a) the demand for our products, (b) the average selling price of our products, which in turn depends in part on the mix of products sold, (c) new product introductions, and (e) the volume and costs of manufacturing of our products.

Operating Expenses

Operating expenses consist of sales and marketing and general and administrative expenses. Sales and marketing expense consists primarily of (a) salaries (b) sales commissions, (c) travel, lodging and other out-of-pocket expenses, and (d) other related overhead. We expect our sales and marketing expense to increase in the future as we further increase our sales. In the second quarter of 2007, we lowered the commissions to sales staff from 5% to 3%, for the maturity and expansion of NPCC business. As a result, we plan to employ more sales staff and pay more commission based on the growing sales.

General and administrative expense consists primarily of (a) salaries (b) labor union fees, (c) insurance fees, (d) lease for housing and property, expenses related to being a public company and (e) other related overhead. We expect general and administrative expense to continue to increase. Being a publicly traded company, we will incur additional expenses related to costs of compliance with securities and other regulations, including increased audit and legal fees and investor relations expenses.

Significant Accounting Policies

Basis of Presentation and Translating Financial Statements - The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The functional currency of the operating subsidiaries in the PRC is the Chinese Yuan Renminbi (CNY); however, the accompanying financial statements have been expressed in United States Dollars ("USD"). The accompanying consolidated balance sheets have been translated into USD at the exchange rates prevailing at each balance sheet date. The accompanying consolidated statements of operations have been translated using the average exchange rates prevailing during the periods of each statement.



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Consolidation - The accompanying consolidated financial statements include the accounts and transactions of Shengda Nano and Shengda Chemical through June 2005, the accounts of Eastern Nano from September 2004 through November 15, 2005, the accounts and transactions of Faith Bloom and its wholly owned subsidiaries from November 15, 2005 through March 31, 2006 and the accounts of ShengdaTech, Inc. and its wholly owned subsidiaries from March 31, 2006. These combined entities are referred to herein as "the Company."

Fair Values of Financial Instruments - The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other receivables, advances to suppliers, receivable from related parties, trade accounts payable, other payables and accrued expenses, advances from customers, and payable to related parties approximate fair value because of the immediate or short-term maturity of these financial instruments.

Cash and Cash Equivalents - Cash and cash equivalents include interest bearing and non-interest bearing bank deposits, money market accounts, and short-term certificates of deposit with original maturities of three months or less.

Accounting Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition - The Company recognizes revenues from the sale of products when they are realized and earned. The Company considers revenue realized or realizable and earned when (1) it has persuasive evidence of an arrangement, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. Revenues are not recognized until products have been shipped to the client, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Company has objective evidence that the criteria specified in client acceptance provisions have been satisfied. The Company sells all products to end-users and recognizes revenues when the products are shipped. The Company has no post-delivery obligations on its products sold.

Trade Receivables and Allowance for Doubtful Accounts - Trade receivables are carried at original invoiced amounts. As a result of the Company historically having no write-offs and all accounts receivables being current, there were no doubtful accounts recorded as of September 30, 2007 and December 31, 2006

Inventory - Inventories are stated at the lower of cost or net realizable value, with cost determined on an average cost basis.

Valuation of Long-lived Assets - The carrying values of the Company's long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that they may not be recoverable. When such an event occurs, the Company projects the undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If projections were to indicate that the carrying value of the long-lived asset will not be recovered, the carrying value of the long-lived asset is reduced by the estimated excess of the carrying value over the projected discounted cash flows.

Property and Equipment - Property and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred and major improvements are capitalized. Gains or losses on sales, trade-ins, or retirements are included in the statements of operations in the period of disposition, determined by reference to their carrying amounts.



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Advances to Suppliers and Advances from Customers - The Company, as is the common practice in the PRC, will often pay advance payments to suppliers for materials and manufactures for equipments and plants, or receive advance payments from customers. Advances to suppliers were $530,290 and $872,289 as of September 30, 2007 and December 31, 2006, respectively. Advances from customers were $0 and $119,923 as of September 30, 2007 and December 31, 2006, respectively.

Cost of Products Sold - Cost of products sold include wages, materials, handling charges, and other expenses associated with the manufacture and delivery of product.

Shipping and Handling Costs - Shipping and handling billed to customers is recorded as revenue. Shipping and handling costs are included in cost of products sold.

Research and product development expenses - Research and product development expenses are included in general and administrative expenses in the statements of income and include researching, developing, and testing of the Company's products.

Retirement Benefit Plans - The Company contributes to various employee retirement benefit plans organized by provincial governments under which it is required to make monthly contributions at rates prescribed by the related provincial governments. The provincial governments undertake to assume the retirement benefit obligations of all existing and future retired employees of the Company. Contributions to these plans are charged to expense as incurred.

Basic and Diluted Earnings per Share - The computation of basic and diluted earning per share is based on the weighted-average number of shares outstanding during the period presented.

Other Comprehensive Income - Other comprehensive income presented in the accompanying consolidated financial statements consists of foreign currency translation adjustments.

Credit Risk - The carrying amounts of trade accounts receivable and other non-trade receivables included in the consolidated balance sheets represent the Company's exposure to credit risk in relation to its financial assets. No other financial assets carry a significant exposure to credit risk. The Company performs ongoing credit evaluations of each customer's financial condition.


Results of Operations

Comparison of Three Months Ended September 30, 2007 and 2006

Revenue

                       For the Three Months Ended September 30,              Period to Period
                          2007                         2006                       Change
                                of Total                    % of Total
                  Amount($)      Revenue     Amount($)       Revenue       Amount($)       %
Chemical           14,047,758       51.70     13,450,007          71.47       597,751       4.44
Nano-Material      13,123,032       48.30      5,368,200          28.53     7,754,832     144.46
Total Revenue      27,170,790      100.00     18,818,207         100.00     8,352,583      44.39




The revenue of our chemical business increased by $597,751 or 4.44% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The increase was mainly due to (i) a $310,532 (1,540 tons) increase in sales of liquid ammonia which was partially offset by a decrease in sale price by $2.81 per ton; (ii) a $24,269 (35 tons) increase in sales of melamine which was partially offset by a decrease in sale price by $4.65 per ton; (iii) a $421,029 (705 tons) reduction in sales of methanol combined with a decrease in selling price by $22.5 per ton; (iv) $30,267 decrease in the selling price of ammonium bicarbonate by $0.72; and (v) a $713,256 favorable change of the exchange rate between RMB and USD. The appreciation of RMB increases the translated revenue in USD. The increase and decrease of sales for the chemical products were caused by the adjustment of our product mix due to market conditions and the fluctuation of the chemical market.



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The increase of total revenue from our NPCC business was $7,754,832 or 144.46% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The increase was mainly due to (i) $8,513,232 additional revenue from an increase in sales of 20,707 tons from our capacity expansion which was partially offset by $1,100,569 resulting from a decrease in the selling price of NPCC by $32 per ton; and (ii) additional $342,169 from the change of the exchange rate between RMB and USD as the appreciation of RMB to USD increased the translated revenue in USD. We have a cost advantage due to the adoption of new technology and lower raw materials cost at our Shaanxi NPCC facilities. As a result, we sold our products to our customers at a more competitive price while being able to maintaining our gross profit margin.

Cost of Revenue and Gross Profit

                                  For the Three Months Ended September 30,                Period to Period
                                     2007                           2006                       Change
                                            % ofTotal                    % of Total
                           Amount($)         Revenue      Amount($)       Revenue       Amount($)        %
Cost of Revenue
Chemical                     10,109,472          37.21      9,870,260          52.45       239,212        2.42
Nano Material                 7,400,362          27 24      3,367,083          17.89     4,033,279      119 79
Total Cost of Revenue        17,509,834          64.45     13,237,343          70.34     4,272,491       32.28
Gross Profit
Chemical                      3,938,286          14.49      3,579,747          19.02       358,539       10.02
Nano Material                 5,722,670          21.06      2,001,117          10.63     3,721,553      185.97
Total Gross Profit            9,660,956          35.55      5,580,864          29.65     4,080,092       73.11




The cost of revenue for our chemical business increased by $239,212 or 2.42% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. Our cost of revenue decreased $284,787 but the change in the exchange rate between RMB and USD increased the translated cost of revenue in USD by $523,999 which completely offset the decrease in cost. The decrease of production cost resulted mainly from the technology improvement in the manufacturing process implemented in April, 2007. The decrease of $284,787 in cost of goods sold was comprised of: (i) a reduction of $362,129 due to decreased sales of 705 tons of methanol and reduced manufacturing cost of methanol by $21 per ton from the improved manufacturing process; (ii) a reduction of $20,206 from reduced manufacturing cost of ammonium bicarbonate because of the improvement in the manufacturing process; and (iii) additional $99,552 as a result of increased sales of 1,539.62 tons of liquid ammonia which was partially offset by saving in the manufacturing cost of $7.92 per ton.

The gross profit of our chemical business increased by $358,539 or 10.02% but its weight in total gross profit decreased from 19.02% for the third quarter of 2006 to 14.49% for the third quarter of 2007 because of the increase in NPCC capacity. The increase of gross profit in the chemical business resulted from
(i) $210,980 from the increased sales of 1,539.62 tons of liquid ammonia which was offset partially by the decrease of the average selling price by $2.81 per ton; (ii) $26,567 from the sale of 35 more tons of melamine which was offset partially by a $4.65 per ton decrease in the average selling price; (iii) a decrease of $58,900 resulting from 705 less tons of methanol sold and a decrease in the selling price of $22.5 per ton; (iv) a decrease of $10,061 caused by a decrease in the selling price of $0.72 per ton of ammonium bicarbonate; and (v) the appreciation of RMB to USD increasing the translated gross profit in USD by $189,265



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The cost of revenue of our NPCC business increased by $4,033,279 or 119.79% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. This was mainly due to (i) additional $5,341,433 from 20,707 tons of increased sales due to our NPCC capacity expansion in Shaanxi which was partially offset by $1,517,351 due to the adoption of new technology and lower raw materials cost at Shaanxi facilities; and (ii) an additional $209,197 from the appreciation in the exchange rate between RMB and USD which increased the translated cost of goods sold in USD.
Our gross profit of NPCC increased from 10.63% for the second quarter in 2006 to 21.06% or $3,721,553 for the third quarter in 2007. This was mainly due to (i) the gross profit margin increased by 6% from the introduction of new technology and the expansion of capacity with lower cost of raw materials at our new factory in Shaanxi (reduced the average unit cost of products by $44 per ton, even though the average selling price decreased by $32 per ton); and (ii) additional $132,927 from the appreciation in the exchange rate between RMB and USD which increased the translated gross profit in USD.


Operating Expenses

                                   For the Three Months Ended September 30,                Period to Period
                                     2007                            2006                       Change
                                           % of Total                     % of Total
                           Amount($)        Revenue         Amount(s)       Revenue     Amount($)        %
Sales and Marketing
Expenses
Chemical                        23,268            0.09           22,228          0.12        1,040        4.68
Nano Material                  412,143            1.52          287,184          1.53      124,959       43.51
Total Sales and
Marketing Expenses             435,411            1.61          309,412          1.65      125,999       40.72
General and
Administrative
Expenses
Chemical                       296,348            1.09          136,657          0.84      159,691      116.26
Nano Material                  413,272            1.52          365,958          0.25       47,314       12.93
Total General and
Administrative
Expenses                       709,620            2.61          502,615          1.09      207,005       41.19




Sales and Marketing expenses of our chemical business increased by $1,040 or 4.68% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The main reason was that the appreciation of RMB to USD increased the translated sales and marketing expenses in USD.

The general and administrative expenses of our chemical business increased by $159,691 or 116.86% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The main reason was increased audit, legal, consulting and other expenses related to being a public company.

Sales and Marketing expenses of our NPCC business increased by $124,959 or 43.51% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The main reasons were (i) sales commission increased by $100,040 as a result of the increase of sales which was partially offset by the decrease in sales commission rate from 5% to 3%; (ii) an $8,022 increase in salary and other sales related expense in Shananxi; and (iii) the appreciation of RMB to USD increased the translated sales and marketing expenses in USD by $16,896.

The general and administrative expenses of our NPCC business increased by $47,314 or 12.93% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. The main reason was increased audit, legal, consulting and other expenses related to being a public company..



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Operating and Other Income

                                      For the Three Months Ended September 30,               Period to Period
                                         2007                           2006                      Change
                                                of Total                    % of Total
                               Amount($)         Revenue      Amount($)      Revenue       Amount($)        %
Income from Operations            8,515,925           0.31     4,768,837           0.25     3,747,088       78.57
Interest Income                      70,599           0.00        33,480           0.00        37,119      110.87
Provision for income taxes          775,264           0.03             -              -       775,264
Net Income                        7,811,260           0.34     4,802,317           0.26     3,008,943       62.66




Operating income increased by $3,747,088 or 78.57% for the quarter ended September 30, 2007 compared to the corresponding period of the prior year. This was mainly due to an increase in revenues of $8,352,583 which was partiallyoffset by an increase of cost of revenue of $4,272,491 and an increase in operating expenses of $335,209.

Interest income for the quarter ended September 30, 2007 increased by $37,119 or110.87%. Such increase was due to the fact that more cash was on deposit at our banks.

For the quarter ended September 30, 2007, an increase in income tax by $775,264 due to the fact that the tax holidays for two of our facilities expired. Under the Chinese tax law, these two facilities are subject to an income tax at the . . .


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Very nice earnings.  I didn't think they were to be released until Monday. 

With SDTH climbing after hours...makes me feel better going into the weekend.. :D

Oh yeaaaahhhh, its gonna be a good day in SDTH land!

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ShengdaTech, Inc. Reports Record Third Quarter 2007 Results

Nov 12, 2007 02:00:00 (ET)


TAI'AN CITY, China, Nov 12, 2007 /Xinhua-PRNewswire-FirstCall via COMTEX/ -- ShengdaTech Inc. ("ShengdaTech") (SDTH, Trade ), a leading manufacturer of nano precipitated calcium carbonate ("NPCC") and coal-based chemical products manufacturer in the People's Republic of China ("PRC"), today reported financial results for the third quarter ended September 30, 2007.


    Third Quarter 2007 Highlights
    -- Revenue increased 44.4% year-over-year to a record $27 million
    -- Gross margin increased 590 basis points to a record 35.6%
    -- Net income increased 62.7% year-over-year to a record $7.8 million
    -- Added nine new domestic customers and three international customers
    -- Completed construction of two new NPCC production lines, increasing
       capacity by 40,000 metric tons
    -- Began construction on new NPCC factory in Xianyang City, Shaanxi
       Province
    -- Added key members to R&D and Finance staff



Revenues for the third quarter of 2007 increased to a record $27.2 million, up 44.4% from $18.8 million in the third quarter of 2006. The increase in revenue is attributed to the increased capacity of the Company's NPCC production filling the continuing demand for its products. In July 2007, ShengdaTech added two new NPCC production lines with a total of 40,000 metric tons of additional capacity. The new lines were operating at 80% capacity at the end of the third quarter and are expected to reach full capacity by the end of November. The NPCC segment contributed 48.3% of total revenue and the chemical segment contributed the remaining 51.7% of total revenue compared to 28.5% and 71.5%, respectively, in the same period a year ago. Gross profit for the quarter was a record $9.7 million, up 73.1% from gross profit in the same quarter a year ago of $5.6 million. Gross margin was 35.6% compared to gross margin of 29.7% in the third quarter of 2006. Net income for the third quarter of 2007 was $7.8 million, up 62.7% from net income of $4.8 million in the third quarter of 2006. Fully diluted earnings per share were $0.14 compared to fully diluted earnings per share of $0.09 in the same period a year ago.

"Our record revenue and net income this quarter demonstrates the strong demand we continue to experience for our NPCC products. Over 70% of our new capacity was sold to current customers who increased their orders," commented Mr. Xiangzhi Chen, President, CEO and Director of ShengdaTech. "Moreover, we added nine new domestic customers and three new international customers, primarily for NPCC in producing PVC, tires and paint."

Revenue from the NPCC segment was $13.1 million for the third quarter of 2007, up 144.8% from $5.4 million in the third quarter of 2006. The increase in year-over-year revenue is attributed to the addition of 60,000 metric tons of NPCC capacity in September 2006 and 40,000 metric tons in July 2007. Total volume of NPCC sold during the third quarter of 2007 was 34,257 metric tons. NPCC used in tires and PVC contributed 46.0% and 37.1% of revenue, respectively. NPCC used in latex increased to 8.5% of total NPCC revenue from 1.5% in the third quarter of 2006. NPCC used in paint, paper and printing ink contributed the balance of 8.4% of total NPCC revenue.

Revenue from the chemical segment for the third quarter of 2007 was $14.0 million, up 4.4% from $13.5 million in the third quarter of 2006. Liquid ammonia and ammonia bicarbonate contributed 36.2% and 28.0% of chemical segment revenue, respectively, and melamine and methanol contributed 17.1% and 18.6% of chemical segment revenue, respectively.

Gross profit for the third quarter of 2007 increased to a record $9.7 million, up 73.1% from $5.6 million in the third quarter of 2006. Gross margin for the quarter was a record 35.6%, up 590 basis points from gross margin of 29.7% in the same period a year ago. Gross margin was favorably impacted by a larger percent of revenue contribution from the NPCC segment along with improved production efficiencies in the chemical segment. Gross margin for the NPCC segment was 43.6% compared to 37.3% in the same quarter a year ago. Gross margin for the chemical segment was 28.0% compared to 26.6% in the third quarter of 2006.

Selling expenses for the third quarter of 2007 were $435,411, or 1.6% of revenue, compared to $309,412 or 1.6% of revenue in the third quarter of 2006. General and administrative expenses were $709,620, or 2.6% of revenue, compared to $502,615, or 2.7% of revenue.

Operating income for the third quarter of 2007 was $8.6 million, up 78.6% from operating income of $4.8 million in the third quarter of 2006. Operating margin for the quarter was 31.3%, up from 25.3% in the same period a year ago.

Net income for the third quarter of 2007 was $7.8 million, up 62.7% from $4.8 million in the third quarter of 2006. Net income for the third quarter includes a tax provision of $775,264, as the tax holiday on income generated from the original NPCC factory in Tai'an City, Shandong Province, ended on December 31, 2006. Fully diluted earnings per share for the third quarter of 2007 were $0.14 compared to fully diluted earnings per share of $0.09 in the third quarter of 2006.

Nine Month Financial Results

For the first nine months of 2007, total revenue was $72.0 million, up 45.8% from the first nine months of 2006 of $49.4 million. Revenue from the NPCC business was $32.9 million, up 160.9% from $12.6 million in the same period a year ago. Revenue from the chemical business was $39.1 million, up 6.3% from $36.8 million in the first nine months of 2006. Gross profit for the first nine months of 2007 was $24.3 million, up 77.4% from gross profit of $13.7 million for the first nine months of 2006. Gross margin was 33.7% compared to 27.7% for the first nine months of 2006. Income from operations for the period was $21.1 million, up 88.7% from $11.2 million in the first nine months of 2006. Net income for the period was $19.3 million, up 70.1% from net income of $11.4 million in the first nine months of 2006. Fully diluted earnings per share were $0.36 for the first nine months of 2007 compared to $0.22 for the first nine months of 2006.

Financial Condition

As of September 30, 2007, ShengdaTech had $41.1 million in cash and cash equivalents, no long-term debt and $39.0 million in working capital. Shareholders' equity stood at $79.0 million up from $57.1 million at December 31, 2006. The Company generated $21.9 million in cash flow from operating activities in the first nine months of 2007.

Business Outlook

ShengdaTech continues to increase its production capacity for NPCC. The 40,000 metric tons of NPCC capacity brought online in July is expected to reach full capacity by the end of November 2007. In September 2007, the Company began construction of 60,000 metric tons of NPCC capacity at its new facility in Xianyan City, Shaanxi Province. The new lines are expected to be completed and contributing to revenue in the first quarter of 2008. Capital expenditures for the full year 2007 are expected to be $54 million, of which $16.6 million has already been spent. Approximately $36 million of the $37.4 million balance is expected to be used for the construction of the new NPCC facility in Xianyan City. Management feels confident the Company will meet or exceed its guidance for the full year 2007 for revenue to be in the range of $96 million to $98 million and net income to be in the range of $23.0 million to $24.4 million with fully diluted earnings per share of $0.43 to $0.45.

"We are dedicating our efforts to increasing NPCC applications and expanding our penetration in international markets. We have recently added a top chemical engineer, Mr. Zhude Xu, to our R&D team to further our efforts to develop NPCC for use in paper," Mr. Chen commented. "We are also currently in discussion with several major international companies including PVC manufacturers in Japan and South Korea and a paper manufacturer in North America."

Excellent result  :)
Now we have very nice both Technical  and fundemental views , It should act perfectly ....

Market will help it today also .

David,

which are your thoughts on SDTH?
Do these numbers are still good for your valuation model?

Cheers,

tera

SDTH's 3rd quarter results:

• ShengdaTech, Inc. Reports Record Third Quarter 2007 Results (http://biz.yahoo.com/prnews/071112/cnm025.html?.v=11)
PR Newswire (Mon 2:00am)

The company beat the revenue and EPS estimate by a significant margin:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41797;image)

The one analyst covering the company expected $25.33 M in revenues and the actual number was $27.17 M. In terms of EPS, he expected $0.11 and it was $0.14. So results were definitely better than expected.

Let me compare these results with the estimates I have in my valuation model:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41798;image)

1) Dilution Factor

I have 1%. In reality dilution was 0%:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41799;image)

2) Revenue CAGR

I have 2 in the valuation model, which means 100% revenue growth. Actually growth was significantly lower, just 44.4%. I believe the difference comes mainly from the following:

«ShengdaTech continues to increase its production capacity for NPCC. The 40,000 metric tons of NPCC capacity brought online in July is expected to reach full capacity by the end of November 2007. In September 2007, the Company began construction of 60,000 metric tons of NPCC capacity at its new facility in Xianyan City, Shaanxi Province. The new lines are expected to be completed and contributing to revenue in the first quarter of 2008.»

I accounted for this capacity increase but of course it takes time to be in full power.

Also, NPCC is growing 144% but it still accounts for a bit less than half of the total company's revenues:

«Revenue from the NPCC segment was $13.1 million for the third quarter of 2007, up 144.8% from $5.4 million in the third quarter of 2006.»

«The NPCC segment contributed 48.3% of total revenue and the chemical segment contributed the remaining 51.7% of total revenue compared to 28.5% and 71.5%, respectively, in the same period a year ago.»

NPCC is getting more and more weight and it is growing faster than 100% a year ... Anyway, I guess that perhaps 100% revenue CAGR is too aggressive, I'll push this estimate down to 75%.

3) Net Profit Margin Estimate

I had 20% in my model and net profit margin in Q3 2007 was 32.7%. I'll adjust my net profit margin estimate to 25%.

4) EPS Multiple Estimate

I have 20, which is the minimum to expect for a company growing this fast. I'll keep it this way.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41800;image)

The optimal selling price given by my valuation model declined from roughly $33 to $27.63. Still, with a 79% expected share price CAGR, SDTH remains extremely attractive at the current market price.

The report also brought us some more interesting information about the company's international expansion and the potential use of NPCC in paper (a new and big market for the company).

Management reaffirmed guidance:

«Management feels confident the Company will meet or exceed its guidance for the full year 2007 for revenue to be in the range of $96 million to $98 million and net income to be in the range of $23.0 million to $24.4 million with fully diluted earnings per share of $0.43 to $0.45.»

The company already made $0.35 EPS in the nine months so far in 2007 and it continues to grow, so I have no doubts that it will beat its own guidance for the year. I'm expecting at least $0.5 EPS for 2007. With a 20 times earnings multiple the stock should close the year at around $10. This is my short term expectation.

Longer term I expect SDTH to be an exceptional investment, I'll keep holding SDTH for the long term. 

SDTH posted great results, yet the stock fell 7.3% :-\

When, after the good news, the stock turned negative traders thought "going down on good news, it's a sell", so the selling gained momentum. I expect that after this "traders' paradise" investors will kick in and buy the "sell the good news", because there's more good news to come.

Q3 EPS was $0.14, or $0.56 annualized. It is clear that there will be growth in 2008 ... say, 2008 EPS will be at least $0.8? So SDTH is trading at 8.7 times forward earnings, in my view. This is very attractive, given the company's growth rate and it should definitely go up.

I'm listening to the conference call now and will write about it at tomorrow's update.

I'll keep holding SDTH for the long term.

The more NPCC's weight in SDTH's revenues, the higher the gross margin:

«Gross margin was 35.6% compared to gross margin of 29.7% in the third quarter of 2006.»

And the trend is for NPCC to represent a higher and higher proportion of SDTH's sales:

«Revenue from the NPCC segment was $13.1 million for the third quarter of 2007, up 144.8% from $5.4 million in the third quarter of 2006.»

«Revenue from the chemical segment for the third quarter of 2007 was $14.0 million, up 4.4% from $13.5 million in the third quarter of 2006.»

«The NPCC segment contributed 48.3% of total revenue and the chemical segment contributed the remaining 51.7% of total revenue compared to 28.5% and 71.5%, respectively, in the same period a year ago.»

A higher gross margin generally translates into a higher net profit margin which generally translates into a higher EPS. There's leverage in SDTH's business model.

How much leverage? Something to calculate over the next update.

I'll keep holding SDTH for the long term.

QuoteHow much leverage? Something to calculate over the next update.

Leverage isn't the right issue to think about today. I want to talk to you about the safety of this investment. Even though the company is starting to sell some products internationally, no doubt the bulk of its sales come from China and inside China, from tire manufacturers.

The market for tires undoubtedly is correlated with economic growth. Everybody knows and expects the car market in China to grow immensely over the years, but recently many doubts were raised about China's economy continuing its long term expansion.

I believe it will, because of two main factors:

1) The Chinese GDP per capita in 2006 was $2,001  and the country still ranks in #107 in a GDP per capita comparison list (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita). For comparison, US GDP per capita in 2006 was $44,190. This means the average Chinese still earns 22 times less than the average American. Do you think China's growth has matured? I don't, I think the Chinese GDP per capita will grow to at least 1/3 of the US.

2) The Chinese save a lot, so they have the cash to keep the expansion going until their standards of living approach those of the West:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=41989;image)

The Chinese won't suffer much if there's a recession, they have an incredible amount of cash.

Everything keeps telling me China has another 10 years of very strong economic growth and SDTH is a ten bagger. Yesterday's drop tells me ... nothing.

I'll continue holding SDTH for the long term.

seeking alpha update:

ShengdaTech Surprisingly Cheap During 'Capacity-Catch-Up' Cycle
posted on: November 26, 2007 | about stocks: SDTH   

In the face of an extremely difficult market environment, we searched for a new small cap stock with all the right defenses: market leadership, demand, growth, value, visibility, technical momentum, lots of cash, zero debt and a risk/reward profile with built-in upside and a measured downside. We think we found it all in this week's selection, with one exception... it's in China. WAIT! Before you change the channel, hear us out.

ShengdaTech, Inc. (nasdaq: SDTH) operates in two segments vital to a number of important economic industries. The Company's chemical's segment is a steady cash cow helping fund their exciting and rapidly growing nano-materials business, primarily the production of Nano Precipitated Calcium Carbonate (NPCC).

What is NPCC? For years, industries have used fillers like precipitated calcium carbonate [PCC] as a means of reducing material cost while increasing functional benefits, but SDTH is one of the first producers of PCC broken down to nano-sized particles. NPCC is used as an additive in tires, PVC, latex, paints, paper, printing ink, etc. The Company's NPCC production for tires currently dominates the market in China, but demand is coming from everywhere. So much demand, in fact, that SDTH is having a tough time building out enough capacity.

In 2003, SDTH had 30,000 metric tons of annual capacity. In August 2006, they built a new plant and added 60,000 tons. This summer, they added another 40,000 tons. Now, SDTH is in the process of completing another 60,000 tons of capacity. This additional capacity, expected online in 1Q08, will bring their total to 190,000 metric tons annually, and make SDTH the largest NPCC supplier in China. The way we see it, the only obstacle to continuing strong, high-margin, double-digit growth is keeping up with demand.

Now, does the marketplace understand the story? In our opinion, NO!

Currently, The Company's Enterprise Value is just over 13-times FY07 earnings and a ridiculously low 10-times next year's earnings. Of course, the market is probably relying on guidance from June that SHOULD have been bumped higher in last week's earnings release, but it was not. In the near-term, we believe SDTH has the potential for a significant upside surprise in 4Q07.

In the long-term, we think the stock could more than double by the end of FY08 based on conservative growth estimates incorporating new capacity and relative peer multiples. The game beyond that will be based on ever-increasing new markets for NPCC and the Company's ability to keep up with demand without losing their leadership position.

Thanks for this marvelous analysis on SDTH la-onda :)

It fully explains SDTH's story and hopefully it will help to dismiss that misleading and uninformed Forbes article.

Look, analysts have raised their full year 2007 and 2008 estimates for SDTH (since SDTH has been beating the estimates by an increasing margin):

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42142;image)

Now, if we consider the following table we clearly see how cheap and attractive SDTH is, relative to the general market:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42143;image)

SDTH has been holding much better than the average Chinese stock, which is a clue that it will go up more than the average when some of the clouds surrounding China these days disappear.

As I've been studying more stocks of various sizes I see the China play has a lot to do with credibility. If the company is very small, it may have the greatest fundamentals, yet investors will attach a low multiple to it because they're suspicious that it's a fraud. But, if the company surpasses the $1 B mark, or even better, the $10 B, suddenly investors believe the numbers are real and then the multiples expand a lot. I see that small Chinese companies often have a P/E of 10 or even less, and the bigger companies sport a 30 plus P/E ratio.

So, the best of both Worlds would be to invest in a small company with the capacity to become a large company, because we would benefit from the company's growth and later from an intense multiple expansion (like it happened with BIDU, for example).

SDTH is currently a $364 M market cap now. Do I think it has the capacity to reach $1 B in the not so distant future? (say, two years time). You bet I do.

I'll keep holding SDTH for the long term. 

Would this be an important news??


Tuesday , November 27, 2007 16:21 ET

According to new short interest data from NASDAQ, short interest for ShengdaTech, Inc. (NasdaqSC: SDTH) INCREASED 5.6% to 2,066,026 shares as reported in mid-November, 2007.

SYMBOL       END OCTOBER    MID NOVEMBER          CHANGE       %CHANGE  DAYS/COVER
--------   -------------   -------------   -------------  ------------  ----------
SDTH           1,957,046       2,066,026        +108,980        +5.57%           5
Based on SDTH's 20-day average daily share volume of 497,350, it would require approximately 5 day(s) of buying to cover this short interest

QuoteWould this be an important news??

No, not relevant news in my view.

I guess the seeking alpha article la-onda brought to us is helping investors see the light in SDTH, since the stock made a bullish breakout of its short term descending trendline. SDTH's expected growth rate for 2008 is 30.6%, while its forward P/E is just $7.77/$0.64 = 12:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42142;image)

Let me type an excerpt of Peter Lynch's book, One Up on Wall Street, for us to understand what he thinks about this type of situation:

«We've gone on about this already, but there's a useful refinement: The p/e ratio of any company that's fairly priced will equal its growth rate. I'm talking about growth rate of earnings here.
If the p/e of Coca-Cola is 15, you'd expect the company to be growing at about 15% a year, etc. But if the p/e ratio is less than the growth rate, you may have found yourself a bargain. A company, say, with a growth rate of 12% a year (also known as a "12% grower") and a p/e ratio of 6 is a very attractive prospect. On the other hand, a company with a growth rate of 6% a year and a p/e ratio of 12 is an unattractive prospect and headed for a comedown.
In general, a p/e ratio that's half the growth rate is very positive, and one that's twice the growth rate is very negative. We use this measure all the time in analyzing stocks for the mutual funds.»

Just considering this, SDTH is a bargain. It should be trading with a p/e ratio of 30 (its growth rate), not 12.

I'll keep holding SDTH for the long term.

I think it's one of the best chances to get this stock at these prices ... I added more yesterday because I expect this to shoot to at least to  $11 in a few days  ;D


let's waiting and watch  ::)

Quote from: Garoh on December 05, 2007, 06:34:37 AM
I think it's one of the best chances to get this stock at these prices ... I added more yesterday because I expect this to shoot to at least to  $11 in a few days  ;D

let's waiting and watch  ::)

I agree Garoh, nice timing :)

The stock had that gap up, then came down to fill it. It should be free to go up now, according to the fundamental trends.

I'll keep holding SDTH for the long term.

Quote from: Garoh on December 05, 2007, 06:34:37 AM
I think it's one of the best chances to get this stock at these prices ... I added more yesterday because I expect this to shoot to at least to  $11 in a few days  ;D

let's waiting and watch  ::)

Your timing was perfect Garoh, I hope you're also right on the $11 call :)

Nothing new out today for SDTH, I'll keep holding for the long term.

Hi David  :)
Yes I'm 90% sure we'll  reach this target , we just need to wait and see ..

I see it from a technical view as well as your excellent fundemantal analysis  ;)

Quote from: Garoh on December 06, 2007, 09:23:15 AM
Hi David  :)
Yes I'm 90% sure we'll  reach this target , we just need to wait and see ..

I see it from a technical view as well as your excellent fundemantal analysis  ;)

Thanks Garoh, and congrats for your awesome timing here :)

SDTH closed at a new all time high yesterday. Analysts are now expecting $0.49 EPS in 2007, against the company's internal guidance of $0.44. This is because SDTH beat analysts expectations for the past four quarters:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=42456;image)

Considering the 2007 EPS estimate, SDTH is trading at 19.8 times earnings. EPS in 2006 was $0.34 and $0.49 is expected for 07, so the earnings growth rate is 44%.

SDTH represents that beautiful situation when the P/E is half of the growth rate.

To maintain the 44% growth rate SDTH has to earn $0.71 per share in 2008. Is this possible? Not just possible, it is likely, in my view. SDTH earned $0.14 per share in Q3 2007 and this is already $0.56 annualized. I can only see growth going forward, not just because of an increase in production volumes, but also because the more weight NPCC has in the company's revenues, the more profit margins expand.

With $0.71 EPS in 2008 and an earnings multiple of 20, SDTH will be a $14.2 stock in late 2008. This is a 46.5% return for the next 12 months and it sounds good to me.

I'll keep holding SDTH for the long term.

QuoteWith $0.71 EPS in 2008 and an earnings multiple of 20, SDTH will be a $14.2 stock in late 2008. This is a 46.5% return for the next 12 months and it sounds good to me.

Instead of a 46.5% return in 2008, buyers around yesterday's close will get 57%. Sellers around yesterday's close will get nothing.

That's all I have to say about what happened with SDTH yesterday.

I'll keep holding the stock for the long term.

ShengdaTech Receives Patent Approval for Advanced NPCC Technology
PR Newswire
December 17, 2007: 08:00 AM EST

TAIAN CITY, China, Dec. 17 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech Inc. ("ShengdaTech" or "the Company") a leading manufacturer of nano precipitated calcium carbonate ("NPCC") and coal-based chemical products in the People's Republic of China ("PRC"), today announced the Company's patent application for its membrane dispersion technology used to manufacture NPCC has been approved by the State Intellectual Property Office of the PRC. The patent number is ZL200510086388.2 and is under protection of PRC patent law for 20 years.

"We are pleased to receive the patent for our membrane dispersion technology. Since the commercialization of our membrane dispersion technology at the end of 2006, we have improved the quality and consistency of NPCC particles, lowered our production cost and increased our market penetration," commented Mr. Chen, CEO of ShengdaTech. "We believe this demonstrates our success in implementing this advanced technology and our ability to continue increasing our market penetration in current and new applications."

The membrane-dispersion technology was co-developed by ShengdaTech and Tsinghua University, the leading science university in the PRC. ShengdaTech and Tsinghua University each has 50% ownership of the technology, while ShengdaTech has sole commercialization rights to all applications using the technology. The membrane dispersion technology enhances the use of carbon dioxide, producing NPCC particles that are more stable. The result is a better quality NPCC product due to the improvement in particle size, uniformity and distribution, which translates into better manufactured end products. ShengdaTech believes the NPCC products produced using this cutting- edge technology will define the international standard for NPCC particles as the Company targets higher-end markets for NPCC applications.

About ShengdaTech, Inc.

ShengdaTech is engaged in the business of manufacturing, marketing and selling nano-precipitated calcium carbonate ("NPCC") products and coal-based chemicals for use in various applications. The Company converts limestone into NPCC using its proprietary technology. The unique chemical and physical attributes make NPCC a valuable ingredient in tires, paints, polyvinyl chloride ("PVC") building materials and other products. NPCC enhances the durability of many products by increased strength, heat resistance, and dimension stabilization. The Company is also engaged in the manufacture and sale of coal-based chemical products namely ammonium bicarbonate, liquid ammonia, melamine and methanol. The Company markets and sells its coal-based products mainly for chemical fertilizers and raw materials in the production of organic and inorganic chemical products, including formaldehyde and pesticides.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the tire industry, changes in composition of tires, ability to attract new customers, ability to increase our product's applications, ability of our customers to sell products, cost of raw material, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission.

    For more information, please contact:

     Crocker Coulson, President, or
     Leslie Richardson, Financial Writer
     CCG Elite
     Tel:   +1-646-213-1915
     Email: [email protected]
            leslie.richardson@ccg

Thanks for posting SDTH's press release in my absence guledh0 :)

• ShengdaTech Receives Patent Approval for Advanced NPCC Technology (http://biz.yahoo.com/prnews/071217/cnm020.html?.v=21)
PR Newswire (Mon 8:00am)

This is obviously good news, but not unexpected. The stock went down exclusively due to the general market negative mood and because there were big profits to take here, to compensate for losses elsewhere.

Anyway, the press release shows one of the reasons I like SDTH so much. ShengdaTech is a unique company, not a Chinese copycat of a Western company. What the company makes isn't made by any other company in the World, and its product has a growing number of applications:

«NPCC used in tires and PVC contributed 46.0% and 37.1% of revenue, respectively. NPCC used in latex increased to 8.5% of total NPCC revenue from 1.5% in the third quarter of 2006. NPCC used in paint, paper and printing ink contributed the balance of 8.4% of total NPCC revenue.»

We have six applications here, but some of them, which are still incipient in terms of revenue contribution (like paper, for example), can be huge. It feels like SDTH is just scratching the surface of possibilities.

I'll keep holding SDTH for the long term.

Quote from: Garoh on December 05, 2007, 06:34:37 AM
I think it's one of the best chances to get this stock at these prices ... I added more yesterday because I expect this to shoot to at least to  $11 in a few days  ;D


let's wait and watch  ::)

It's on track .. High $10.55 almost at the target but next will be $13 No doubt ..
Nice pick David

QuoteIt's on track .. High $10.55 almost at the target but next will be $13 No doubt ..
Nice pick David

Thanks Garoh, and congrats on your great call :)

SDTH closed at a new all time high yesterday, and this isn't due to any "China hype", because Chinese stocks aren't rising as a group. Finally investors are understanding SDTH's unique business and are bidding the stock higher.

We're at $509 M market cap now and the forward earnings multiple is 16 (considering $0.64 EPS estimate for 2008 (http://finance.yahoo.com/q/ae?s=SDTH)).

I believe that if we get up to a $1 B market cap the multiple will expand considerably ... most institutional investors don't believe/get interested in Chinese companies when they're below $1 B market cap. I've been seeing outstanding Chinese micro and small caps trading at a p/e of less than 10 while Chinese big caps are trading at 30, 50 or even 100 times earnings.

I'll keep holding SDTH for the long term.

nice christmas chart:

David,

Plz check the following link:

http://www.investorplaceblogs.com/users/stocksshah/2007/12/the_best_of_the_best.php

Quote from: stocky on December 24, 2007, 10:51:24 PM
David,

Plz check the following link:

http://www.investorplaceblogs.com/users/stocksshah/2007/12/the_best_of_the_best.php

Hi Stocky

You should've written Cesar Borja instead of David Randolph  ;D

I think he will be a well known guy in the near future  :)
wish you best of luck David .

I wish to thank David for his great patience in writing me replying to my questions!
Thanks for the great job you did this year, Merry Christmas from italy!

Andrea (alias Tera)

Quotenice christmas chart:

Yep la-onda, on Monday SDTH closed at a record high for a 4th day in a row, so it's really bullish from a technical standpoint.

Quote from: stocky on December 24, 2007, 10:51:24 PM
David,

Plz check the following link:

http://www.investorplaceblogs.com/users/stocksshah/2007/12/the_best_of_the_best.php

Wow stocky, thanks a lot for the distinction :) If one year ago someone told me I would teach fundamental analysis I wouldn't believe it. But the more I learn and pass on to you, the more I enjoy it ;)

QuoteI think he will be a well known guy in the near future :)

Well, I hope not Garoh, I have no desire at all to be a "well known guy". I wish and look for the best for my family, and fame ... would bring more problems than virtues, in my view.

But thanks :)

Quote from: terainvestment on December 25, 2007, 05:48:49 AM
I wish to thank David for his great patience in writing me replying to my questions!
Thanks for the great job you did this year, Merry Christmas from italy!

Andrea (alias Tera)

Thanks Andrea, I still have to reply one e-mail from you ... well, I'll do it right now on this thread, because maybe some more people have the same doubts:

QuoteHi David,

I have a question: when the stock dilution of a company is considered "normal"?
Is there a math formula to determine if the dilution is positive or negative for shareholders?

There are two ways to look at this issue.

1 - There's "dilution" every time the # of shares outstanding rises. For example, if you own 10,000 shares of a company with 1 million shares outstanding, you own 1% of the company. If then the company issues and sells another 1 million shares, your 10,000 shares now represent just 0.5% of the company. 

2 - There's dilution whenever the EPS goes down due to the rise in the # of shares outstanding. As you probably know ...

EPS = Net Income/# of shares outstanding

... so a rise in the # of shares outstanding makes EPS go down. However, if the capital raised from issuing and selling new shares is invested in a way that makes Net Income rise more than proportionately, then the final result is a higher EPS and usually a higher valuation for the whole company. In the prior example, it is possible that your 0.5% of the company now are worth more than the 1% you used to own.

So the math formula would be:

If the end result of a rise in the # of shares outstanding is a lower EPS, then there's "negative dilution". If the end result of a rise in the # of shares outstanding (due to an even bigger rise in net income) is a higher EPS, then there's "positive dilution".

So, whenever a company announces a private placement or some other issuance of new shares (it can be to fund an acquisition of another company, or for an employee incentive plan, or to cover for losses and just keep things going) investors need to think if that will bring a lower or higher EPS in the near future.

Merry Christmas from Portugal Andrea :)

Looking at SDTH now, which is currently the biggest gainer and largest holding of the Main Portfolio.

The company has been beating even its own optimistic perspectives. In the Q2 earnings release management said the following:

«"We are rapidly expanding our market share as we build our leadership position in the NPCC market in China. Currently, we are in the testing process with a number of potential new customers, including 12 PVC manufacturers, 20 tire manufacturers, 15 latex makers, 25 adhesive producers, and four paper makers. We expect to add five to six new clients in the third quarter 2007. In addition, we recently doubled our sales team to 60 sales agents," commented Mr. Chen. "Overall, we expect to see continued strong growth in our NPCC products as we bring on additional capacity and increase our marketing efforts."»

And then in Q3 they reported:

«Added nine new domestic customers and three international customers»

I'm also enthusiastic about the following:

«"We are dedicating our efforts to increasing NPCC applications and expanding our penetration in international markets. We have recently added a top chemical engineer, Mr. Zhude Xu, to our R&D team to further our efforts to develop NPCC for use in paper," Mr. Chen commented. "We are also currently in discussion with several major international companies including PVC manufacturers in Japan and South Korea and a paper manufacturer in North America."»

I wonder who is this North America paper manufacturer? Could it be International Paper (IP)? (just speculating here).

Anyway, the global paper market is huge, even bigger than the global tire market ... if we think about it for a second, it doesn't make all that much sense to produce paper from cutting trees ... or producing tires using natural rubber. It seems that nano precipitated calcium carbonate (NPCC) is a real cost effective alternative to substitute some of the natural resources commonly used to produce many of the goods we use in our everyday lives.

The stock has been rising very rapidly and what I thought could happen in late 2008, it seems is around the corner now:

QuoteWith $0.71 EPS in 2008 and an earnings multiple of 20, SDTH will be a $14.2 stock in late 2008. This is a 46.5% return for the next 12 months and it sounds good to me.

However there are people already starting to talk about $1 EPS in 2008. And this would mean at least $20 a share and a $1 B market cap. Thinking about it, the company already brought an additional 40 metric tons of capacity online in November 2007 and it is scheduled to bring another 60 metric tons in Q1 2008. This is 100 metric tons to add to the pre-existing 90 metric tons of capacity. So, if  producing 90 metric tons they make about $0.5 EPS in 2007, why not $1 EPS in 2008, since they'll be producing about 190 metric tons of NPCC?

The market seems to take all the company can produce. Longer term, following the same logic, the company has plans to reach 1,000 metric tons of annual production of NPCC, which would mean about $5 EPS and a share price of about $100.

Sure, there will be big pullbacks along the way, but if everything goes as plan, in a few years SDTH will be a $5 B company ($100 a share) and I'll remain focused on the long term and will ignore the short term fluctuations.

I'll keep holding SDTH for the long term.

Wow, nice volume and price action in SDTH today, 150K shares plus in the last 10 minutes  >:D >:D >:D

Another great pick by David!

Hopefully, we will see CHME.OB make a similar move soon.....

Happy New Years!

Bourbon  ;D

Going to $15

Thanks :)

SDTH is posing me a problem that I like to have ... you see, SDTH currently represents 13.3% of the Main Portfolio, because it more than doubled since I bought it with the usual size of 6.6%. If SDTH doubles again in 2008 (I hope so), it would then represent a 26% or so holding (if all the others remained constant - I hope not).

It wouldn't seem responsible, from a money management perspective, to have 1/4 of the portfolio in one single stock. On the other hand, if I cut my exposure to this stock, or adopt cutting exposure when a stock goes way up as a rule, then I would perhaps cut the legs to the two or three tenbaggers that I may have in the Portfolio, ending up with a lower long term performance.

For now I'm not prepared to make any hard rule, I'll continue being subjective about this issue. Whenever I feel uncomfortable due to holding a larger stake of the Main Portfolio in one single holding, I'll reduce the exposure to that holding.

This still isn't the case for SDTH ... I see $1 EPS in 2008, and I'm still not sure what the p/e should be for this stock, because, you see, SDTH is a Chinese innovator, a unique company making a unique product in the whole World, and this is rare, even more so in China (compared to the US). And the way SDTH has been growing and is about to grow ... I don't know guys, the market can just get insane and push this thing up to 50 times earnings or something like that.

My mind is opened to all possibilities and I'll just sit tight and do nothing. I'll let the market tell me how much is enough, not my personal judgment. For as long as fundamentals keep improving, the multiples can keep expanding.

I'll continue holding SDTH for the long term.

If volatility picks up for SDTH will you ever put in a trailing sell stop?
If so, what trigger would you cause you to put the trailing sell stop in? *** PE, etc.)

Thanks

Hopefully not the reason for the rally.  Looks like good long term news, but no reason to bid the price up.

ShengdaTech Introduces NPCC for Color Ink Jet Paper

http://biz.yahoo.com/prnews/080102/cnw011.html?.v=39

Quote from: Hungaryson on December 31, 2007, 11:45:16 AM
If volatility picks up for SDTH will you ever put in a trailing sell stop?
If so, what trigger would you cause you to put the trailing sell stop in? *** PE, etc.)

Thanks

Before I had the chance to reply your question you've assumed that I wouldn't put any trailing stop so you've canceled the 3 Stocks Premium service, even after acknowledging that you earned 20% net profit in 2007 following the Main in a very difficult year.

Now I would call you a "trailing stop fundamentalist".

So, now that you have already canceled the service but still have access to the premium service area, I'm going to tell you a thing or two about the stock market and my experience.

- If you use trailing stops you will never, I mean never, own a 5 or 10 bagger in your entire investment career. The chances of you winning the 1st prize in lottery are probably higher than catching a 10 bagger without a 30% pullback along the way (assuming 30% would be your trailing stop). This means you will always collect small profits.

- And what about losses, are you as fast in taking a loss as you are about taking a profit, or you hold losses for the long run?

- After all the work I have in accessing the long term fundamental value of a stock, do you think it would be wise, or even prudent, to put my investment decision in the hands of a bunch of guys that just can't stand to have an outstanding and growing profit and need to quickly put it into their pockets, regardless of the fundamentals? I see the value 4 times higher over the long term, but because the FED raises rates or whatever reason, the stock falls 30% in a correction, I should let go of my analysis, and decide, not with my head and work, but with others heads and lack of comprehension for the business?

- If you read the books of the best investors ever, like Warren Buffet or Peter Lynch, for example, you'll see that they don't care about what the market thinks. They have their own ideas and follow them with conviction. That's why they were able to grow so much over the years, while others, always jumping from one stock to the next, without really knowing what they're doing or why they're doing it, never really accomplish anything.

Anyway, obviously nothing personal here, I wish you the best of luck in your investments. I will stay path with my investment philosophy, of course opened to new ideas (but not ideas that I have already concluded and experienced as wrong), regardless of how many subscribers I have in this service. Even if I stay alone here I'll continue to follow my strategy.

You take care :)

Going back to SDTH, indeed it may pullback, and it seems the general market is due for a further slide. But the company's long term value, given its products and fundamental trends, is way above the current value and I'll keep holding it for the long term.

No man will ever grow rich taking 1 bag of profits where there are 10 bags to take.

SDTH fell 28.5% from top to bottom over the last three days and probably that was enough to throw most "tailing stops" out of board.

SDTH holds a great promise for the sustainability of mankind on this little blue planet called Earth, because the company makes a product (nano precipitated calcium carbonate - NPCC) which is starting to be used to replace many of the natural resources needed to make common goods like tires, paper, paint, printing ink, latex, PVC, etc.

SDTH will have 190 metric tons of annual capacity in Q1 2008, as it brings online an additional 60 metric tons of capacity. Longer term plans are for annual production capacity of 1,000 metric tons.

NPCC is an awesome product/technology that lowers the cost of producing many goods needed in our everyday lives. NPCC will be in high demand whatever the global economy does.

SDTH will be a multi-billion dollar business.

Consider "trailing stops", "shorting", "charts", "technical indicators", "bear markets" and other similar stuff all you want. My 12 years of intense stock market study and experience tell me the best attitude for me to take is to keep holding this great business for the long term.

Applaud David. I know it's so tough to have a public portfolio and more so if there are subscribers. I have been hanging on this site since it started and I can attest that it is the best. Just people are looking short term and what they see is a sea of red. I hope they will see the sea of green soon too.

Quote from: stocky on January 07, 2008, 09:59:24 PM
Applaud David. I know it's so tough to have a public portfolio and more so if there are subscribers. I have been hanging on this site since it started and I can attest that it is the best. Just people are looking short term and what they see is a sea of red. I hope they will see the sea of green soon too.

Thanks a lot for your support stocky :) Some days are tougher than others, the important thing is that we keep on going :)

Shengda Tech used to be called China Nanotech. I guess they changed the name of the company because the first one was somewhat speculative and it was tied to one particular market, and SDTH wants to be a global company.

I found an article dated August 15th, 2006, which explains what SDTH has been doing:

China Nanotech Opens New Factory for Nano Precipitated Calcium Carbonate (http://www.azonano.com/news.asp?newsID=2849)

NPCC isn't new, in fact there are companies in the World making it for 25 years, like MTX, for example, which trades on the NYSE. The "new factor" in SDTH's story is the method they use for producing NPCC:

«The new factory will employ China Nanotech's proprietary breakthrough Membrane Diffusion technology developed in collaboration with Tsinghua University in China. The Membrane Diffusion process offers significant advantages over both the traditional manufacturing method for NPCC and the more advanced "Ultra-Gravity" technology. Like the "Ultra-Gravity" process, the Membrane Diffusion process significantly increases production efficiency and stabilizes the grain size of NPCC, so as to enhance product quality. However, the Membrane Diffusion technology significantly reduces production costs as compared to the high-cost Ultra-Gravity process, while also improving quality control and consistency.

"China Nanotech's new Shaanxi factory is the first industrial application of the breakthrough Membrane Diffusion method for NPCC production in the world," said Mr. Xiangzhi Chen, President, CEO and Director of China Nanotech. "By adopting this technology, we expect to realize a significant competitive advantage in the burgeoning global market for NPCC.»

SDTH's technology is patent protected:

• ShengdaTech Receives Patent Approval for Advanced NPCC Technology (http://biz.yahoo.com/prnews/071217/cnm020.html?.v=21)
PR Newswire (Mon, Dec 17)

SDTH's higher quality NPCC is taking business away from competition:

• ShengdaTech Introduces NPCC for Color Ink Jet Paper (http://biz.yahoo.com/prnews/080102/cnw011.html?.v=39)
PR Newswire (Wed, Jan 2)

«Anne Paper collaborated with ShengdaTech on the research and development of NPCC for use in its color ink jet paper in an effort to replace the higher cost, lower quality NPCC obtained from an international manufacturer.»

We can access SDTH's future value using the following simple math:

Since ...

«Total volume of NPCC sold during the third quarter of 2007 was 34,257 metric tons.»

... 34,257 metric tons of NPCC production meant $6.03 share price, then ...

«If completed, the third phase of construction at Shengda Industrial Park is expected to take production capacity to 1 million tons of NPCC per year.»

... 250,000 metric tons of NPCC of quarterly production will mean a 250,000/34,257 = 7.3*$6.03 = $44 price per share.

Of course, there are more variables to be considered, not just production capacity, but this gives us an idea of SDTH's potential if the company just keeps growing according to management's initial plan.

I'll continue holding SDTH for the long term.

Whatever the global economy does, people will still need tires, paper, paint, ink, PVC and other materials that NPCC helps doing. SDTH makes the cheapest and best NPCC in the World, using its proprietary technology, and therefore it will keep growing its market share at a fast pace, in my view.

I'm not prepared to consider selling SDTH or even reduce my exposure to this stock below $30. This stock will more than compensate for my mistakes elsewhere, but only if I continue holding it with strong hands.

It is a fact that SDTH opened at $8.54 yesterday, almost completely erasing the bull run it had.

Fundamentals clearly show this stock is worth more than $30, but hey, some people bought below $8, and they couldn't stand the risk of letting a profit turn into a loss, could they?

Personally I'm getting tired of seeing several of my holdings returning 100% and then fall back to my buying price ... this has been a persistent behavior, I feel like the market is doing all it can for me to give up on my long term approach and get back to more intuitive short term trading.

But my resolution to be a long term investor in stocks is way too strong. It's going to take a lot to shake me out of my convictions.

As far as I'm concerned, SDTH will be over $30 in two years time and I don't care about what happens to the chart between now and then. I'll just pay attention to fundamental developments, to see if the major investment story remains on track.

Hi David,

Have you ever considered doing something in the middle between short term and long term trading? Maybe using the fundamental developments in concert with a longer term technical strategy for buys and sells?  I do not know if you have read it but in Stan Weinstein's book Secrets for Profiting in Bull and Bear Markets he defines different timetables of trading.

Just curious what your thoughts might be on this.

Ken

Quote from: David Randolph on January 22, 2008, 11:11:35 PM
It is a fact that SDTH opened at $8.54 yesterday, almost completely erasing the bull run it had.

Fundamentals clearly show this stock is worth more than $30, but hey, some people bought below $8, and they couldn't stand the risk of letting a profit turn into a loss, could they?

Personally I'm getting tired of seeing several of my holdings returning 100% and then fall back to my buying price ... this has been a persistent behavior, I feel like the market is doing all it can for me to give up on my long term approach and get back to more intuitive short term trading.

But my resolution to be a long term investor in stocks is way too strong. It's going to take a lot to shake me out of my convictions.

As far as I'm concerned, SDTH will be over $30 in two years time and I don't care about what happens to the chart between now and then. I'll just pay attention to fundamental developments, to see if the major investment story remains on track.

QuoteHi David,

Have you ever considered doing something in the middle between short term and long term trading? Maybe using the fundamental developments in concert with a longer term technical strategy for buys and sells?  I do not know if you have read it but in Stan Weinstein's book Secrets for Profiting in Bull and Bear Markets he defines different timetables of trading.

Just curious what your thoughts might be on this.

Ken

This would take the entire evening and unfortunately I'm short on time today. Generally and when it comes to stocks, I pretty much like Peter Lynch's approach which completely ignores the short term fluctuations, as painful as that can be.

But it's an open debate, we'll come back to this.

Coming back to SDTH, the company released some information a couple of days ago which is interesting:

In response to recent investor questions, ShengdaTech has provided the following: (http://www.sec.gov/Archives/edgar/data/1160165/000114420408003424/v100517_ex99-1.htm)

You may think that 3% cost savings isn't much, but if you think of very large corporations it is significant. And why not cut costs 3% if everything else remains equal?

SDTH sells a product that saves money. Every company wants that.

The stock rose 41% from that $8.5 open ::) so maybe it will need to consolidate a bit now, but longer term the stock will be worth $30 plus in my opinion.

ShengdaTech Announces Upgrade Listing to Global Select
Thursday January 31, 8:00 am ET

http://biz.yahoo.com/prnews/080131/cnth012.html?.v=42 (http://biz.yahoo.com/prnews/080131/cnth012.html?.v=42)


TAIAN CITY, China, Jan. 31 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech Inc. ("ShengdaTech" or "The Company") (Nasdaq: SDTH - News) a leading manufacturer of nano precipitated calcium carbonate ("NPCC") and coal-based chemical products in the People's Republic of China ("PRC"), today announced that its application to list its securities on The NASDAQ Global Select Market has been approved effective January 31, 2008.


"We are extremely proud to be approved to list our securities on the NASDAQ Global Select," commented Mr. Xiangzhi Chen, CEO of ShengdaTech. "The upgrade is a true testament to ShengdaTech's commitment to enhancing shareholder value and represents yet another milestone as we increase our presence in the international markets."

The NASDAQ Global Select Market, one of the three market tiers at NASDAQ, recognizes NASDAQ's world-class listed companies and their commitment to high standards and good governance. It is reserved for companies that meet the highest initial listing standards in the world based on financial and liquidity requirements. Prior to the upgrade, the Company's shares were listed on the NASDAQ Capital Market under the same symbol.

Maybe some of our stocks will be included. Anyway,i like the trend.

       

Press Release Source: Claymore Securities, Inc.


Claymore Offers First China Small Cap ETF
Wednesday January 30, 9:35 am ET 
Investment Opportunities in China are Growing


LISLE, Ill.--(BUSINESS WIRE)--Claymore Securities, Inc. today announced the launch of the Claymore/AlphaShares China Small Cap Index ETF (AMEX: HAO - News) on the American Stock Exchange. This ETF is the first ETF focused on small cap Chinese companies, and is Claymore's second China-focused ETF.
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"China's 1.3 billion residents are consuming more, creating more and with the country's increasing economic clout, they've become important global consumers," says Burton Malkiel, Chief Investment Officer of AlphaShares, Inc., the Fund's Index Provider, and the author of From Wall Street to the Great Wall: How Investors Can Profit from China's Booming Economy. Malkiel, also author of A Random Walk Down Wall Street, says, "This is an opportunity for retail investors to access the emerging small cap market in China. Because historically most investment has been in large cap Chinese stocks, we feel the valuations of small cap stocks are attractive and present good potential for long-term growth." Malkiel is the Chief Investment Officer of AlphaShares, Inc., the Fund's Index Provider. AlphaShares receives a fee from the Fund for the use of its Index.

Claymore/AlphaShares China Small Cap Index ETF (AMEX: HAO - News) seeks investment results that correspond generally to the performance, before the Fund's fees and expenses, of an equity index called the AlphaShares China Small Cap Index. The Fund will normally invest at least 90% of its total assets in common stock, American depositary receipts ("ADRs"), American depositary shares ("ADSs"), global depositary receipts ("GDRs") and international depositary receipts ("IDRs") that comprise the Index. The Index is rebalanced and reconstituted annually.

The Index is designed to measure and monitor the performance of publicly-traded mainland China-based small capitalization companies. The Index is maintained by Standard & Poor's and is published on the AlphaShares website at www.alphashares.com. A float-adjusted capitalization maximum of $1.5 billion and a minimum of $200 million are used for initial portfolio construction and eligibility. A float-adjusted capitalization of less than $1.75 billion and greater than $150 million are required for ongoing inclusion in the Index. Only shares open to foreign ownership are included in the Index. These include all Hong Kong listed securities including China H-Shares and Red Chips, and N-Shares trading in New York and their equivalents trading in other foreign markets. China A-Shares and China B-Shares are not eligible for inclusion nor are debt or quasi-debt securities such as convertible securities.

About Claymore Securities

Claymore Securities, Inc. is a privately-held financial services company offering unique investment solutions for financial advisors and their valued clients. Claymore entities have provided supervision, management, servicing or distribution on approximately $18.5 billion in assets as of December 31, 2007. Claymore currently offers exchange-traded funds, unit investment trusts and closed-end funds. Claymore Advisors, LLC, an affiliate of Claymore Securities, serves as investment adviser to the Fund.

About AlphaShares, Inc.

I'm going to reduce the Main's exposure to SDTH from the current 13.8% to 12%, so I can buy 5% of capital in MALL.

I continue to love SDTH as much as before, just need to free a little bit of capital, so I don't go into margin.

It looks obvious that the 2008 EPS estimates for SDTH will need to be revised higher:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43527;image)

You see, the company already made $0.14 EPS in Q3 2007, up from $0.11 in Q2 2007. If the company just keeps doing as well as it did in Q3 2007, that is, earning 14 cents per share, it will then earn $0.56 in 2008. But it's almost a sure thing that there's going to be strong growth, mainly because of two issues:

1) More NPCC capacity coming online in 2008 and ...
2) NPCC's share of the company's revenue will continue to rise, which has the effect of increasing profit margins.

I would say that a more fair estimate would be something like $0.21+$0.24+$0.27+$0.30 = $1.02 EPS in 2008. This would be up from ... well, now I also see that (well, not now, I think I referred to this also in previous updates) the 2007 EPS estimate is too low (http://finance.yahoo.com/q/ae?s=sdth). The one analyst covering the stock still has $0.49 as his estimate for 2007, but SDTH already earned $0.43 in the first nine months of the year ... I think it will report something between $0.15 and $0.17 in Q4 2007, bringing the full year number to something between $0.58 and $0.60, way above the $0.49 still expected. Say SDTH will earn $0.59 EPS in 2007. According to my $1.02 estimate for 2008, it represents 72.9% growth and the stock is trading at just 13.2 times that estimate.

Even though I reduced SDTH's exposure from 13.8% to 12% on Friday, its share of the Main is back up to 12.8% already. My hands are not weaker, they are stronger now, because I feel more comfortable after diversifying some more ...

I'll keep holding SDTH for the long term.

Wednesday, February 13, 2008 08:00 ET

TAIAN CITY, China, Feb. 13 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech Inc. ("ShengdaTech") (Nasdaq: SDTH) a leading manufacturer of nano- precipitated calcium carbonate (NPCC) and coal-based chemical products in the People's Republic of China ("PRC"), announced today that its Vice President of Finance, Ms. Wendy Fu will present at the upcoming Roth Capital Partners "20th Annual OC Growth Stock Conference".

The Roth Capital Partners "20th Annual OC Growth Stock Conference" is a four-day event featuring presentations from over 300 small-cap companies including over 40 U.S.-listed Chinese companies from a number of sectors, such as technology, healthcare, energy, industrial and consumer products.

    Date:    Wednesday, February 20, 2008
    Time:    8:30 a.m. Pacific Time
    Venue:   The Ritz Carlton Laguna Niguel; Dana Point, California

    Live webcast:  http://www.shengdatechinc.com

Interested parties and institutional investors may register for the conference by visiting the conference website at http://www.rothconference.com/ or by calling Roth Capital Partners at (800) 678-9147.

About ShengdaTech, Inc.

ShengdaTech Inc. is engaged in the business of manufacturing, marketing and selling nano-precipitated calcium carbonate ("NPCC") and coal-based chemicals for use in various applications. The Company converts limestone into NPCC using its proprietary technology. The unique chemical and physical attributes make NPCC a valuable ingredient in tires, paints, polyvinyl chloride ("PVC") building materials and other products. NPCC enhances the durability of many products by increased strength, heat resistance, and dimension stabilization. The Company is also engaged in the manufacture and sale of coal-based chemical products namely ammonium bicarbonate, liquid ammonia, melamine and methanol. The Company markets and sells its coal-based products mainly for chemical fertilizers and raw materials in the production of organic and inorganic chemical products, including formaldehyde and pesticides. For additional information, please visit the Company's website at http://www.shengdatechinc.com .

    For more information, please contact:

     Crocker Coulson, President
     Leslie Richardson, Financial Writer
     CCG Elite
     Tel:   +1-310-231-8600
     Email: [email protected]
            [email protected]

SOURCE ShengdaTech, Inc.

More information on SDTH from article on February 14th.  To all, good health and trading.
Poli


Try The China Perspective Free  Chemicals 
The China Perspective   
Thursday, February 14, 2008 15:55:59
Small particles drive ShengdaTech
By AMY CHEUNG

ShengdaTech is China's only approved supplier of nano precipitated calcium carbonate (NPCC) products to the domestic tire industry. NPCC, which is a functional filler used in rubber, plastics, paint, ink, automobile tires and PVC building materials, is made from limestone broken down to particles of ~100 nanometer (nm) in size, smaller than the wavelength of visible light. Combined with a strong presence in the agricultural chemicals sector, the company has secured a 10% share of the US$150 million domestic automobile tires market for NPCC. With record third quarter earnings of $27.2 million in the bag, up 44.4% from the third quarter of 2006, the NASDAQ-listed company is eyeing to pick up a larger slice of the domestic pie and expand into offshore markets. CEO Chen Xiangzhi talked to Amy Cheung from The China Perspective about China's domestic chemicals sector and the company's expansion plans.

The China Perspective: According to your Q3 earnings report, ShengdaTech has launched five new nano precipitated calcium carbonate (NPCC) production lines and begun construction on three more lines at the NPCC factory in Xianyang city. What is driving your expansion, and do you plan to further expand capacity?

Chen Xiangzhi: Undoubtedly, China's rapidly growing manufacturing industry offers a great opportunity for our NPCC products. Our NPPC particles are produced using the most advance technology – membrane dispersion technology – which produces one of the highest quality and most stable NPCC particles on the market today. Because of the unique properties of our NPCC particles we are the only manufacturer to produce NPCC for use in tires. Currently, 47% of our revenue generation is from NPCC used in tires. Through our R&D efforts, we intend to continue pioneering new applications for NPCC.

Our new NPCC lines will have a production capacity of 60,000 metric tons per year, and it should reach full capacity four to five months after launch, which will be in July or August 2008.

Regarding further expansion plans, we will consider that after the new lines reach full capacity. Once the company makes any decision on that, we will update our shareholders and the public.

TCP: Your stock on NASDAQ seems to be on a downward trend despite record 3Q07 results. What is your view on this phenomenon?

CXZ: We don't comment on the market fluctuation on our stock price. We believe that if we continue to consistently grow our business, maintain strong gross margins and profitability as well as remain committed to our investor relation program, the market will provide a fair valuation for our stock.

TCP: What is your guidance for Q407 and 2008 earnings?

CXZ: We have not provided guidance for Q407 or 2008. Our guidance for the full year 2007 is for revenue to be in the range of $96 million to $98 million and net income to be in the range of $23.0 million to $24.4 million with fully diluted earnings per share of $0.43 to $0.45.

TCP: ShengdaTech's key products are used in tires and fertilizers. Going forward, what is your view on the outlook for these sectors?

CXZ: So far, we are the only NPCC manufacturer whose NPCC products have been successfully applied to the tire industry in China. The tire industry, like so many industrial sectors, is still in its early growth stage. In addition to the major metropolitan markets, the markets in rural areas have also opened up because rural consumers there, including farmers, now have higher earning power and are able to afford cars. According to recent national population research, 807.39 million people live in rural areas in China, making up 63.91% of the total national population. With that, we believe suburban and rural areas will be a huge market for China's automotive and auto part industry.

The majority of our chemical products are used in farming areas, for instance chemical fertilizer. As a big agricultural country, agriculture, farms and farmers are still critical to China's economic development. The central government has issued many policies that favor the agriculture sector and it's believed that the PRC will continue to support the industry with favorable policies. This has created great opportunities and huge potential for the agricultural products industry.

The management is confident in the growth opportunity for NPCC and even though the chemical businesses is a mature market, we remain open to acquisitions opportunities should they meet our requirements.

TCP: ShengdaTech has appointed new R&D and finance executives. What does this mean for the company? Do you foresee further changes in key posts?

CXZ: It reflects our effort to develop new products and retain high-quality professionals with international background in order to meet international standards and build our presence in international markets. We will continue looking for international professionals in various areas, such as sales and marketing, as we push forward our exporting business plan to European and North American countries.

TCP: Is it likely that China's domestic chemical sector will consolidate in the future through M&A activities?

CXZ: We do believe that China's chemical industry will consolidate through M&A, but it depends on market conditions in the different sectors and regions. China's government has successful experience in upgrading and consolidating traditional industries through working with private-owned enterprises, and we believe the government will apply the same strategies to the chemical industry which will offer us great opportunities.

TCP: ShengdaTech is the only company approved to sell NPCC products to the Chinese tire market, but the company has only secured a 10% share of the US$150 million NPCC market in China. Do you have any plans to increase your market share?

CXZ: We have established a strong reputation in the tire industry for the use of NPCC in tire manufacturing. Doublestar, the largest tire manufacture in China, submitted a dissertation at the 14th China Technology Research Conference on Tire manufacturing. The dissertation was titled "Application of Active Nano-Calcium Carbonate in Tires" and was published in Tire Industry magazine. We will continue providing first-class products and services to our customers and develop new applications within the tire industry to maintain and grow our market share.

In the meantime, we will explore new applications in areas such as rubber, painting, latex and other industries, with the ultimate aim of establishing the same dominance in these new areas as we have achieved in the tire industry. China's NPCC market is an emerging market; the key characteristic of the market is that there are many producers of NPCC but they do not provide the consistency or quality of product that we do. Moreover, there are no defined industry standards or regulations. Under such circumstances, we intend to set the industry standard for NPCC products and build the dominant position. Already we are the largest manufacture of NPCC in China and we are continuing to increase our capacity. The increased capacity will enable us to work with larger manufactures in the future.

SDTH Roth conference:
http://www.wsw.com/webcast/roth16/sgat.ob/
wednesday 11.30 am

8)

QuoteMore information on SDTH from article on February 14th.  To all, good health and trading.
Poli

Quote from: la-onda on February 19, 2008, 01:42:15 AM
SDTH Roth conference:
http://www.wsw.com/webcast/roth16/sgat.ob/
wednesday 11.30 am

8)

Thanks for posting these Poli and La-onda :)

One of the many things I like about SDTH is that it helps making products which are perishable, like tires, paper, paint and so on. These products will always be bought, used and then bought again, giving SDTH a steady flow of revenue and profits.

Once a big manufacturer chooses SDTH's NPCC, it will probably adhere to it for years to come.

The company persists on its 2007 full year guidance:

QuoteTCP: What is your guidance for Q407 and 2008 earnings?

CXZ: We have not provided guidance for Q407 or 2008. Our guidance for the full year 2007 is for revenue to be in the range of $96 million to $98 million and net income to be in the range of $23.0 million to $24.4 million with fully diluted earnings per share of $0.43 to $0.45.

It is obvious that they'll earn more than $0.44 EPS in 2007, since they already made $0.35 EPS in the first nine months of the year ($0.14 in the 3rd quarter) and said there no seasonality in its business. In fact, Q4 2006 had EPS of $0.11 compared to $0.09 in Q3 2006.

So I would say SDTH makes $0.16 in Q4 2007 for a full year EPS of $0.51.

But more important will be their guidance for 2008, which they will probably give. I'll be looking for something like $0.75 EPS.

SDTH isn't undervalued now, but I see it as the kind of business that is safe and will keep growing strongly over the long term. It isn't overvalued either.

According to fundamental trends, in a couple of years time SDTH will be a $30 - $40 stock and I'll keep holding for this outcome.

SDTH already released the slides of today's Roth conference:

SDTH conference slides (http://www.sec.gov/Archives/edgar/data/1160165/000114420408010350/v104241_ex99-1.htm)

It's a nice summary of SDTH's business and long term investment story. However, there's nothing new here and management insists on that 2007 guidance ???

I don't know if they're being conservative or they're warning us not to expect a great 4th quarter result. I mean, why wouldn't they raise the guidance now, since they probably already know what the number will be?

Maybe it is their policy to just give annual guidance and then just change at the occasion of the annual report.

I have this "little" doubt about the short term.

Longer term, given SDTH's innovative technology, its current penetration in the market it serves (about 10%), its expansion to new applications for NPCC and its international expansion, I'm pretty confident that SDTH will grow EPS at least 30% for 5 years to come. And a 30% grower with a 25 p/e is better than a 10% grower with a p/e of 10, even if the multiple of the 1st company contracts and the multiple of the second expands. 

Let me give you an example:

Company X earns $1 EPS in 2007. It grows 10% a year and has a p/e of 10. In 5 years time the stock will be worth 61% more. If the p/e expands to 15, it will be worth 141% more.

Now let's take the 30% grower with a 25 p/e being reduced to a p/ of 20 in 5 years. Company Y had an EPS of $1 in 2007. In 5 years time its EPS will be $3.71. Apply an earnings multiple of 20 and get a $74 stock, 197% more than it is now.

Of course, if multiples stayed the same (instead of the 1st company expanding and the second contracting) the differences would be even greater. The 1st company would be up 61% while the 2nd one would be up 271%.

SDTH is clearly of the second company type. I don't have any doubts that SDTH will grow EPS by at least 30% a year over the next 5 years. And it can be more ...

I'll keep holding SDTH for the long term, despite a few doubts about the next quarter's earnings.

The conference call was a little confusing regarding the earnings for 2007.

On the third slide SDTH management indicates an EPS of .47, but on the 25th slide SDTH indicates and EPS of .43 to .45.

An analyst brought this up on the conference call.  Management indicated that some of the information was outdated and encouraged shareholders to listen to the up-coming conference call in mid-March.  ???

I don't know what to take out of this?  Was management just using these slides for illustrative purposes and less concrete  guidance?

Quote from: kslifka on February 20, 2008, 02:28:44 PM
The conference call was a little confusing regarding the earnings for 2007.

On the third slide SDTH management indicates an EPS of .47, but on the 25th slide SDTH indicates and EPS of .43 to .45.

An analyst brought this up on the conference call.  Management indicated that some of the information was outdated and encouraged shareholders to listen to the up-coming conference call in mid-March.  ???

I don't know what to take out of this?  Was management just using these slides for illustrative purposes and less concrete  guidance?

The $0.47 is the TTM (trailing twelve months) number and the $0.43-$0.45 is the guidance they set at the beginning of 2007 but I'm confident they'll beat their guidance. They need just $0.09 to meet the guidance and I'm expecting at least $0.15 EPS in the 4th quarter.

I still didn't listen to the conference and will update this analysis before tomorrow's open.

Ouch...I guess the Roth Conference didn't inspire anyone. ???

Quote from: kslifka on February 21, 2008, 02:05:46 PM
Ouch...I guess the Roth Conference didn't inspire anyone. ???

Hi kslifka, I guess yesterday's sell off was due to two factors:

1) Many people (like myself) have good profits in SDTH and every time the general market goes down people rush to take some money (or all the money) out of SDTH's table.

2) There was a lot of confusion on yesterday's conference (http://www.wsw.com/webcast/roth16/sgat.ob/) about SDTH's guidance. This also happened in prior conferences which led to short term sell offs and a subsequent recovery.

To me it was crystal clear that management said the company will beat its 2007 guidance of $0.43-$0.45 EPS. This guidance was something they made in the beginning of the year and didn't change even as results started being better than expected. Maybe they didn't change the guidance because their bonus is tied to by how much they exceed expectations. Maybe they just prefer to be conservative and positively surprise people.

Because they maintained their guidance many people fear that 4th quarter EPS will be $0.09 to meet the guidance, which is way below the $0.14 achieved in the 3rd quarter. But this is nonsense to me, I think they'll do at least $0.15 in Q4 2007 and $0.5 in the full year.

Moreover, their 2008 guidance will probably be something like $0.7-$0.8 EPS.

I remain confident in SDTH's long term outlook and I'll keep holding the stock.

SDTH's management is doing a terrific job. The following press release was just out:

• ShengdaTech Introduces NPCC for Use in Polyethylene (http://biz.yahoo.com/prnews/080227/cnw016.html?.v=39)
PR Newswire (Wed 8:00am)

Plastics is bigger than tires, which is currently the major market for SDTH. SDTH's long term potential is awesome, recession or not.

I'll keep holding SDTH with strong hands throughout all ups and downs and expect this stock to be a multi-bagger for the Main Portfolio in a few years time.

Hi

To those who haven't bought this stock yet ...

It's a gold chance to get in around $10    :)

I'm back after I sold it a month ago ..

yikes!
this is being dropped like a hot potato, I wish I would have gotten out of it this morning.  :'(
the daily stochastics are ripe for buying but the weekly stochastics are still pointing downward I don't know why I missed that!  :'(
there seems to be strong support around 8.47/share.
then the daily stochastics and weekly stochastics will be lined up and ripe for loading up.
JMHO

Closing below $10 today is my stop ...

In my opinion, more attention needs to be paid to entry and exit points for this portfolio, especially in a bear market (yes, we are in a bear market).  Buy and hold is a pointless strategy when the profit made from doing so disappears.

Quoteauthor=pinoleropuro link=topic=10358.msg112857#msg112857 date=1204656417]
yikes!
this is being dropped like a hot potato, I wish I would have gotten out of it this morning.  :'(
the daily stochastics are ripe for buying but the weekly stochastics are still pointing downward I don't know why I missed that!  :'(

Hmmm...... yeah it does actually look very bad from a TA point of view. In fact it looks so bad that I am tempted to buy  ;)

I don't think that anyone who have spend a little time reading this thread is in doubt that this is a great long-term investment. Shengda is a market leader in a very fast growing industry in one of the few economies in the world that are not fighting a recession but on the contrary is trying to cool down the economy.

I am not sure what they are going to report on March 17 but I feel pretty sure that this is a great long-term investment in an otherwise very uncertain market.

Could Shengda be an alternative to my precious Seagate bonds  ???

Well I am tempted. It is a bit tedious to have to wait 6 months to collect interest  :)

On a serious note I am very concerned about the US economy. So let me give you my 2 cents on the US economy. And here is the first problem. If I don't remember wrong my 2 us cents were worth 2 Euro cents when 3SOF opened. Today they are worth 1.3. Without having made a single bad investment I have lost 35% (I am still up in Mozambican Metricais though!)

With the rest of the world looking quite healthy compared to US I am wondering for how long international investors will continue to hold the hand under the US stock market (and more importantly the US bond market).

From my perspective the US is making a hugh mistake by lowering interest rate and ignoring an increasing inflationary pressure. It seems like the US is more concerned about the stock market and next weeks unemployment figure than the long-term wellfare of the nation.

Yes lowering interest and giving tax rebates to everybody will help fuel US consumption and thereby by default the US economy - but at what cost:

• Increased trade deficits
• Devaluation of the dollar
• Imported inflation

Yes I do know that a lower dollar will help US exports but us economy compared to Europe's or Asia's is not export driven and long-term US will only have one choice and that is to lower private consumption and accept high unemployment.

Dallas Federal Reserve President Richard Fisher said today that:" it's better to have the economy go into an economic downturn than to risk a pickup in inflationary pressure through low rates due to global forces."

Unfortunately he only has one vote but it is at least nice to know that there is some common sense at the table when the FED meets.

Coming back to Shengda – it seems I should have bought when I started writing this nonsense. At least I would have been a bit richer despite the awful TA  :D

slides from last conference, probably I will buy below 9$  >:D

2nd part of slides just fyi

SDTH issued the following press release yesterday:

ShengdaTech Schedules Conference Call to Discuss 2007 Fourth Quarter and Year End Results (http://biz.yahoo.com/prnews/080304/cntu019.html?.v=26)
PR Newswire(Tue 8:00am)

And people are afraid of the 4th quarter results, because of what we've discussed earlier:

QuoteBecause they maintained their guidance many people fear that 4th quarter EPS will be $0.09 to meet the guidance, which is way below the $0.14 achieved in the 3rd quarter. But this is nonsense to me, I think they'll do at least $0.15 in Q4 2007 and $0.5 in the full year.

I just want the company to release the results asap and to provide 2008 guidance, which I expect to be something between $0.65 and $0.75 EPS. This should be enough to put SDTH back up to the $14-$15 level. It would also be nice if they announced further plans to expand NPCC's production capacity.

Quote from: Garoh on March 04, 2008, 10:37:20 AM
Hi

To those who haven't bought this stock yet ...

It's a gold chance to get in around $10    :)

I'm back after I sold it a month ago ...

Quote from: Garoh on March 04, 2008, 02:25:18 PM
Closing below $10 today is my stop ...

Have you ever tried trading futures Garoh? You seem to have developed a nice skill to quickly change your views and flow with the market, which is a necessary condition to be a successful futures trader.

Quote from: buddjas1 on March 04, 2008, 02:49:06 PM
In my opinion, more attention needs to be paid to entry and exit points for this portfolio, especially in a bear market (yes, we are in a bear market).  Buy and hold is a pointless strategy when the profit made from doing so disappears.

I still disagree that we're in a bear market. I guess that until we get a new low below $126 on the SPY (by a convincing margin), I'll be allowed to remain a long term bull on the stock market.

Have you ever read "One Up on Wall Street" by Peter Lynch buddjas1? If you do you'll see that this great stock picker defends that an investment can only be judged 3 years after it was made. Any judgment before that can be counterproductive, since the motivations that lead to a buying decision were long term oriented, and the market values stocks in unpredictable and irrational ways over the short term.

But I get your point, thanks for your input.

Michael, what a pleasure to read your analysis, both of SDTH and the US economy!

My views are somewhat different. I think the US is suffering a psychological depression because it is clear that it will lose its leadership role of the World in a decade or two. Probably this happened in Britain too around 1900 (it would be interesting to know). But of course, later on, Britain was a lot better having the US as a huge commercial partner than it would be without it. The same thing now with the US and China, in my view. But of course, these are all very long term thoughts.

If we're entering a new Bear Market the previous Bull ended without any euphoria or optimism.  The public was never invited to get back in. None of my friends has stocks, like they did in 1998 and especially 2000.

Anyway, moving back to SDTH ... this company goes to other companies and says: "hey, do you want to save some money and at the same time improve the quality of your products?" How can their potential costumers say no?

I think SDTH will be a $5 B company in a few years and nothing will shake me out of this conviction.

Ah, I almost forgot pinoleropuro and his stochastic oscillator. I thought you were convinced by what happened with PAL ...

Quote from: pinoleropuro on March 04, 2008, 01:46:57 PM
yikes!
this is being dropped like a hot potato, I wish I would have gotten out of it this morning.  :'(
the daily stochastics are ripe for buying but the weekly stochastics are still pointing downward I don't know why I missed that!  :'(
there seems to be strong support around 8.47/share.
then the daily stochastics and weekly stochastics will be lined up and ripe for loading up.
JMHO

You're probably using www.stockcharts.com to get your stochastics, right?

If you want, change the parameters you use here ...

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=43951;image)

... this way the stochastics will say anything you want and you'll always be happy :)

I'll keep holding SDTH for the long term.

Quote from: Garoh on March 04, 2008, 10:37:20 AM
Hi

To those who haven't bought this stock yet ...

It's a gold chance to get in around $10    :)

I'm back after I sold it a month ago ...

Quote from: Garoh on March 04, 2008, 02:25:18 PM
Closing below $10 today is my stop ...

Have you ever tried trading futures Garoh? You seem to have developed a nice skill to quickly change your views and flow with the market, which is a necessary condition to be a successful futures trader.

Thanks David , No I've never tried trading futures and I won't ...I don't want to get confused  :)
I shouldn't fight the market's  trend , in such  too volatile market one need to catch any chance and protect profits ..
I'm happy with my work , Options and stocks with more hardwork to get in at the right price and timing .
It's very important to pay attention to TA David . It tells you many things about hidden info in most cases .

Let's see if SDTH can beat the market  ;)

QuoteIt's very important to pay attention to TA David . It tells you many things about hidden info in most cases.

I disagree, especially with what I would call the "tic-tac" technical analysis you're talking about. But I respect your views.

It's funny how people are always so scared of trading futures, yet they're more than willing to trade options, which are far more complex and risky than futures.

Quote from: Garoh on March 04, 2008, 02:25:18 PM
Closing below $10 today is my stop ...

You were lucky yesterday, since SDTH closed at $10.02 and now trades at $10.35. We'll see if it gathers some more positive momentum ... but like Michael says, SDTH is a stock to own for the long term, at least if one is an investor.

Thanks for your inputs, keep them coming :)

Quote from: David Randolph on March 05, 2008, 10:24:39 AM

QuoteIt's very important to pay attention to TA David . It tells you many things about hidden info in most cases.

I disagree, especially with what I would call the "tic-tac" technical analysis you're talking about. But I respect your views.

It's funny how people are always so scared of trading futures, yet they're more than willing to trade options, which are far more complex and risky than futures.

Quote from: Garoh on March 04, 2008, 02:25:18 PM
Closing below $10 today is my stop ...

You were lucky yesterday, since SDTH closed at $10.02 and now trades at $10.35. We'll see if it gathers some more positive momentum ... but like Michael says, SDTH is a stock to own for the long term, at least if one is an investor.

Thanks for your inputs, keep them coming :)

Well at least I'm doing well ..
I'm not trading futures because it's scary , it's because I don't like them. Yes Iptions is very risky but I understand them very well and so far i'm 85% wining on all of my trades  :)

Sdth again , No I'm not lucky it closed at above $10 , however I was almost sure it wouldn't do that  :D

It's a nice stock and the next target i'm planning to sell at is $15 but I'm afraid of March 17  ;D

Let's wish the best for all of us

Quote
On a serious note I am very concerned about the US economy. So let me give you my 2 cents on the US economy. And here is the first problem. If I don't remember wrong my 2 us cents were worth 2 Euro cents when 3SOF opened. Today they are worth 1.3. Without having made a single bad investment I have lost 35%

²

>:(

SDTH is a long term play on the Chinese consumer, which I think is the macroeconomic emerging trend.

SDTH will have recurrent and growing revenues due to participation in the making of perishable and absolutely necessary products like tires, paper, paint, etc.

I believe it is possible (I mean, everything is possible) that SDTH comes down to $7-$8, as its forward earnings multiple contracts to 10 or so, but there I would consider it a strong buy, not a sell.

I'll continue holding SDTH for the long term.

QuoteI believe it is possible (I mean, everything is possible) that SDTH comes down to $7-$8, as its forward earnings multiple contracts to 10 or so, but there I would consider it a strong buy, not a sell.

Unfortunately, it's happening, as SDTH closed at $8.9 yesterday. I see SDTH's business as almost independent of the economic cycle, however, valuation gyrates as investor's appetite for stocks changes.

Anyway, something happens, over the years, which makes companies worth $100 M, $1 B, $10 B or $100 B. The gyrations in valuations are then made around these "intrinsic fundamental values".

I see SDTH's "intrinsic long term fundamental value" around $5 B, when the company fully executes on its plans to increase NPCC annual production capacity to 1,000 tonnes.

SDTH's current market cap is $500 M.

Some stocks will rise 10 fold, even in a severe bear market, and I believe that SDTH, being linked to the Chinese consumer, has a good chance.

I'll keep holding SDTH for the long term. 

SDTH will release its 4th quarter results Monday before the market open and I expect them to be above expectations. This will at least dismiss that confusion about the company's 2007 guidance.

The 2008 guidance will probably drive the share price over the short term. In early 2007, after earning $0.34 per share in 2006, they gave us the $0.44 guidance, a 29% increase in EPS, which I expect the company to beat by a comfortable margin (I expect SDTH to make $0.5 EPS in 2007).

If they foresee another 29% increase they'll guide for $0.65 EPS in 2008. Well I guess this would leave the stock more or less where it is now ... I have some hope that they could guide somewhat higher, to $0.75 - $0.80 EPS ... this would make the stock surely rise.

Anyway, if nothing extraordinary occurs in 2008, I guess SDTH will trade between $6.5 and $15.

There's always the possibility of faster growth, due to new applications for NPCC or international expansion, but as it is now I guess this will be the outcome.

I see SDTH as a safe long term investment to be held for several years.

Source: ShengdaTech Inc.      Helpful? We'll see.

ShengdaTech, Inc. Announces Record Fourth Quarter and Full Year 2007 Results
Monday March 17, 7:00 am ET
-- Record fourth quarter revenue and net income climb 23.5% and 26.5%, year-over-year, respectively
-- NPCC Products account for 48.2% of fourth quarter revenue

TAIAN, Shandong, China, March 17 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech Inc. (Nasdaq: SDTH - News), a leading manufacturer of nano precipitated calcium carbonate (NPCC) and coal-based chemical products manufacturer in the People's Republic of China ("PRC"), today reported financial results for the fourth quarter and year ended December 31, 2007.

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Fourth Quarter 2007 Highlights

-- Record revenue increased 23.5% year-over-year to $28.6 million

-- Gross margin increased 2.7 percentage points year-over-year to 35.8%

-- Net income increased 26.5% year-over-year to $7.8 million, or $0.14 per diluted share

Full Year 2007 Highlights

-- Record revenue increased 38.6% to $100.7 million; exceeding guidance of $96 million to $98 million

-- NPCC revenue increased 112.3%; contributed 46.4% to total revenue

-- Record net income increased 54.2% to $27.0 million, or $0.50 per diluted share; exceeding guidance of $23.0 million to $24.4 million

ShengdaTech's record revenue for the fourth quarter of 2007 is primarily attributed to the new NPCC lines added in July 2007 reaching full capacity in November 2007, resulting in 130,000 total metric tons of capacity in production. The NPCC segment contributed 48.2% of total revenue for the quarter and the chemical segment contributed the remaining 51.8% of total revenue compared to 40.5% and 59.5%, respectively, in the same period a year ago.

"We are pleased to report our third consecutive quarter of revenue and net income growth which is due to continued strong market demand for our NPCC products," Mr. Xiangzhi Chen, President and CEO of ShengdaTech, commented. "In the fourth quarter of 2007, we added 13 new customers including five tire manufacturers, three PVC producers, three latex producers, a paint manufacturer and a paper manufacturer. In addition, our new NPCC lines, with a total of 40,000 metric tons of capacity, reached full operating capacity this quarter."

Revenue from NPCC products increased 46.9% to $13.8 million in the fourth quarter of 2007 from $9.4 million in the fourth quarter of 2006. The increase in year-over-year revenue was due to the addition of 40,000 metric tons of NPCC capacity in July 2007 which reached full capacity in November 2007. Total volume of NPCC sold during the fourth quarter of 2007 was 35,680 metric tons. NPCC for use in tires represented the majority of the NPCC sales at 43.4% of total NPCC revenue. Sales of NPCC for use in PVC and latex experienced the strongest growth in the fourth quarter, up 8.6% and 20.7%, respectively, from the third quarter of 2007. PVC and latex represented 39.0% and 9.9%, respectively, of total NPCC revenue. NPCC used in printing ink, paint, and paper represented the balance of 7.7% of NPCC revenue.

Revenue from chemical products increased 7.5% to $14.8 million in the fourth quarter 2007 from $13.8 million in the comparable quarter in 2006. Sales of liquid ammonia and methanol increased 9.8% and 8.3%, respectively, from the third quarter of 2007 as a result of stronger market demand and an increase in market price. Liquid ammonia and methanol represented 38.4% and 19.5%, respectively, of the chemical segment's revenue. Sales of ammonia bicarbonate declined 6.3% from the third quarter of 2007, as the fourth quarter is the seasonally slowest quarter for agriculture, and subsequently chemical fertilizer use in northern China. Ammonia bicarbonate represented 25.4% of the chemical segment's revenue and melamine contributed the balance of 16.6% of sales during the quarter.

Gross profit for the fourth quarter of 2007 was $10.3 million, up 33.6% from $7.7 million in the fourth quarter 2006. Gross margin for the quarter was 35.8% compared to 33.1% for the same period in 2006. The chemical segment benefited from strong pricing for liquid ammonia, methanol, and melamine in the quarter resulting in gross margin of 29.5%, up 3.3 percentage points from 26.2% in the same period in 2006. Gross margin for the NPCC segment was 42.6% in the fourth quarter compared to gross margin of 43.3% in the same quarter last year. The slight decline of gross margin was due to a combination of increased depreciation expense, cost of coal used in the manufacturing process and transportation cost of raw materials.

Selling expenses for the fourth quarter of 2007 were $0.5 million, or 1.8% of revenue, unchanged from $0.5 million, or 2.2% of revenue, in fourth quarter 2006. General and administrative (G&A) expenses were $1.3 million or 4.6% of revenue, compared to $0.9 million, or 3.8% of revenue, in the same period last year. The increase in G&A expense was mainly attributed to expenses associated with reaching compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and other public company costs.

Operating income for the fourth quarter of 2007 was $8.4 million, up 34.2% from $6.3 million in the same period a year ago. Operating margin was 29.5% compared to 27.1% in the fourth quarter of 2006.

Net income for the fourth quarter of 2007 increased 26.5% to $7.8 million from $6.1 million in the same period a year ago. Fully diluted earnings per share for the fourth quarter 2007 were $0.14, compared to $0.11 the same period last year.

Full Year 2007 Results

Revenue for the full year 2007 increased 38.6% to a record $100.7 million, compared to $72.6 million in 2006. The NPCC segment generated 46.4% of revenue, or $46.7 million in 2007, up 112.3% from $22.0 million in 2006. The chemical segment generated the remaining 53.6% of revenue, or $53.9 million, up 6.6% from $50.6 million in 2006. Gross profit was $34.6 million, up 61.7% from $21.4 million for the full year 2006. Gross margin was 34.3% in 2007 compared to 29.4% in 2006. Operating income was $29.6 million, up 69.1% from $17.5 million in 2006. Operating margin was 29.4% in 2007 compared to 24.1% in 2006. Net income increased 54.2% to $27.0 million from $17.5 million in 2006. Fully diluted earnings per share for 2007 were $0.50 compared to $0.34 for the full year of 2006.

Financial Condition

As of December 31, 2007, ShengdaTech had $26.4 million in cash and cash equivalents, $43.8 million in working capital and no long-term debt. Net cash provided by operating activities for the year was $13.8 million, including the impact of $17.7 million advanced to suppliers for equipment for the 60,000 MT NPCC lines. Shareholders' equity stood at $89.1 million, up from $57.1 million at year end 2006.

Recent Events

On January 2, 2008, ShengdaTech announced it developed a new NPCC application for use in surface coating for top-grade color ink jet paper.

On January 31, 2008, the Company began trading on The NASDAQ Global Select Market.

On February 27, 2008, ShengdaTech announced it successfully developed a new NPCC product for use in polyethylene ("PE") plastic products.

Business Outlook

ShengdaTech is in the process of completing the test runs on its three new stainless steel NPCC lines in Xianyang City, Shanxi Province. Each line has 20,000 metric tons production capacity and is expected to ramp up to full capacity by August 2008. The stainless steel lines have a production life of 30 years compared to 10 years for carbon steal lines. In addition, the stainless steel ensures the purity of the NPCC particles enabling the Company to target higher-end markets and international manufacturers. The Company has been successful in developing and commercializing new applications of NPCC for paper and polyethylene manufacturing, and is working on developing new NPCC applications in a variety of markets such as asphalt, automobile paint and silicone-adhesives.

ShengdaTech continues to evaluate acquisition opportunities in the chemical segment and to actively explore potential sites in Shandong Province for its next phases of NPCC expansion. The Company expects 2008 revenue and net income to be in the range of $132 - $134 million and $33 - $35 million, respectively, for fully diluted earnings per share of $0.62 - $0.65.

"The opportunities for growth in our NPCC and chemical businesses remain robust. We will continue growing our NPCC business by expanding capacity, developing new higher-end NPCC applications and increasing exports," commented Mr. Chen. "We are aggressively evaluating acquisition candidates in the chemical business and exploring potential sites in Shandong Province for the next phases of NPCC expansion. We are optimistic that we will be successful in finding a location that will meet the capacity requirements of our strategic plan."

Conference Call

ShengdaTech will host a conference call at 9:00 a.m. EST on Monday, March 17, 2008, to discuss the 2007 fourth quarter and year end financial results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 888-419-5570. International callers should dial 617-896-9871. The pass code for the call is 57786686. If you are unable to participate in the call at this time, a replay will be available on Monday, March 17, 2008 at 11:00 a.m. EST through Monday March 31, 2008. To access the replay, dial 888-286-8010, international callers should dial 617-801-6888. The conference pass code is 92199623. This conference call will be broadcast live over the Internet and can be accessed by all interested parties by clicking on http://www.shengdatechinc.com . Please access the link at least fifteen minutes prior to the start of the call to register, download, and install any necessary audio software. For those unable to participate during the live broadcast, a 90-day replay will be available shortly after the call by accessing the same link.

About ShengdaTech, Inc.

ShengdaTech, Inc. ("The Company") is engaged in the business of manufacturing, marketing and selling a variety of nano precipitated calcium carbonate ("NPCC") products and coal-based chemicals for use in various applications. The Company converts limestone into NPCC using its proprietary technology. The unique chemical and physical attributes make NPCC a valuable ingredient in tires, paints, polyvinyl chloride ("PVC") building materials and other products. It enhances the durability of many products by increased strength, heat resistance, and dimension stabilization. The Company is also engaged in the manufacture and sale of coal-based chemical products namely ammonium bicarbonate, liquid ammonia, melamine and methanol. The Company markets and sells its coal-based products mainly for chemical fertilizers and raw materials in the production of organic and inorganic chemical products, including formaldehyde and pesticides.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by ShengdaTech on its conference call in relation to this release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding the Company's ability to prepare for growth, the Company's planned manufacturing capacity expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the tire industry, changes in composition of tires, pricing and demand trends for the Company's chemical products, changes to government regulations, risk associated with operation of the Company's new manufacturing facility, risk associated with large scale implementation of the new NPCC manufacturing process, the ability to attract new customers, ability to increase its product's applications, ability of its customers to sell products, cost of raw material, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.


                       SHENGDATECH, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                          For the Three Months        For the Years Ended
                                  Ended
                              December 31,                  December 31,
                               2007         2006         2007           2006
                        (unaudited)  (unaudited)
    Net Revenue:
      Chemical          $14,828,065  $13,792,226  $53,933,120    $50,592,217
      Nano-material      13,795,137    9,389,676   46,721,673     22,007,814
       Total Net
        Revenue          28,623,202   23,181,902  100,654,793     72,600,031

    Cost of Revenue:
       Chemical          10,448,041   10,178,837   39,282,251     37,924,593
       Nano-material      7,915,655    5,326,269   26,812,587     13,297,976
         Total cost
          of revenue     18,363,696   15,505,106   66,094,838     51,222,569

    Gross Profit:
        Chemical          4,380,024    3,613,389   14,650,869     12,667,624
        Nano-material     5,879,482    4,063,407   19,909,086      8,709,838
         Total Gross
          Profit         10,259,506    7,676,796   34,559,955     21,377,462

    Operating expenses
     Sales & Marketing      495,032      508,805    1,771,168      1,260,647
     General &
      administrative      1,328,920      882,967    3,232,911      2,641,474
    Total operating
      expenses            1,823,952    1,391,772    5,004,079      3,902,121

    Income from
     operations           8,435,554    6,285,024   29,555,876     17,475,341

    Non-operating
     income (expense)       -12,094     -199,159      -12,094        -89,068
    Interest Income          71,318       62,476      274,203        140,375
    Income before
     provision for
     income taxes         8,494,778    6,148,341   29,817,985     17,526,648
    Provision for tax       715,209           --    2,787,640             --

    Net Income           $7,779,569   $6,148,341  $27,030,345    $17,526,648

    Basic and Diluted
     Earnings Per Share       $0.14        $0.11        $0.50          $0.34


    Basic Weighted
     - Average Shares
       Outstanding       54,143,920   54,095,103   54,107,408     51,900,641
    Diluted Weighted
     - Average Shares
       Outstanding       54,193,667   54,257,388   54,188,410     52,022,801




                       SHENGDATECH, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                               December 31,     December 31,
                                                        2007            2006

    ASSETS
    Current Assets
    Cash and cash equivalents                    $26,366,568     $34,684,142
    Trade accounts receivable, less allowance
     for doubtful accounts of $0                   7,889,001       5,588,676
    Other receivables                                 13,962         157,352
    Advances to suppliers                         19,436,544         872,289
    Inventory                                      1,955,384       2,151,612
    Receivable from related parties                    1,712           1,601
    Total Current Assets                          55,663,171      43,455,672

    Property and Equipment, net of
     accumulated depreciation
     of $6,126,393 and 3,674,605, respectively    45,156,739      23,573,680
    Land use rights, net of accumulated
     amortization of $1,031 and $0,
     respectively                                    124,028              --
    TOTAL ASSETS                                $100,943,938     $67,029,352

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
    Trade accounts payable                        $5,296,530      $2,957,413
    Other payables and accrued expenses            3,276,473       2,235,758
    Income and other taxes payable                 2,303,402       1,237,180
    Advances from customers                               --         119,923
    Payable to related parties                     1,064,348       3,349,814
    Total Current Liabilities                     11,940,753       9,900,088
    Shareholders' Equity
    Preferred stock - $0.00001 par value;
     10,000,000 shares authorized;
     no shares outstanding                                --              --
    Common stock - $0.00001 par value;
     100,000,000 shares authorized;
     54,202,036 and 54,095,103 shares
     outstanding, respectively                           541             540
    Additional paid-in capital                    21,616,469      21,824,121
    Statutory reserves                             5,642,419       3,301,379
    Retained earnings                             54,877,045      30,187,740
    Accumulated other comprehensive income         6,866,711       1,815,484
    Total Shareholders' Equity                    89,003,185      57,129,264
    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                     $100,943,938     $67,029,352



                        SHENGDATECH, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                         For the Years Ended December 31,
                                                  2007                2006
    Cash Flows from Operating
     Activities:
    Net income                             $27,030,345         $17,526,648
    Adjustments to reconcile net
     income to net cash provided
     by operating activities:
    Depreciation and amortization            2,128,980           1,031,387
    Loss on disposal of property,
     plant and equipment                         1,845              16,377
    Compensation paid with warrants                 --             153,619
    Changes in assets and
     liabilities:
    Accounts receivable                     (1,839,452)         (1,635,713)
    Other receivables                          144,500           4,040,220
    Advances to suppliers                  (17,767,908)           (588,722)
    Inventory                                  330,614            (611,842)
    Trade accounts payable                   2,306,124           1,468,602
    Other payables and accrued
     expenses                                  606,185             230,538
    Income and other taxes payable             942,034             (85,055)
    Advances from customers                   (123,077)            117,453
    Net Cash provided by Operating
     Activities                             13,760,190          21,663,512

    Cash Flows from Investing
     Activities:
    Purchase of property and
     equipment                             (19,090,018)        (15,365,898)
    Construction in progress                (2,206,133)            (92,020)
    Purchase of land use rights               (120,083)                 --
    Net Cash used in Investing
     Activities                            (21,416,234)        (15,457,918)

    Cash Flows from Financing
     Activities:
    Proceeds from issuance of common
     stock                                          --          13,969,714
    Changes in related party
     receivable / payable                   (2,415,904)          3,882,177
    Distribution to shareholder               (207,651)           (971,496)
    Other non-trade receivables                     --                  --
    Net Cash (used in) provided by
     Financing Activities                   (2,623,555)         16,880,395

    Effect of Exchange Rate Changes
     in Cash                                 1,962,025             848,853

    Net Change in Cash                      (8,317,574)         23,934,842
    Cash and Cash Equivalents at
     Beginning of Period                    34,684,142          10,749,300
    Cash and Cash Equivalents at End
     of Period                             $26,366,568         $34,684,142



    For more information, please contact:

     Crocker Coulson, President
     Leslie Richardson, Financial Writer
     CCG Elite Investor Relations
     Tel:   +1-646-213-1915
     Email: [email protected]


Source: ShengdaTech Inc.

What an unfortunate day to release earnings :o $0.62 to $0.65 EPS 2008 guidance.

Are there going to be any investors out there today with a stomach to buy  ;)

Thanks for posting SDTH's 4th quarter and full year 2007 results soxguy :)

ShengdaTech, Inc. Announces Record Fourth Quarter and Full Year 2007 Results (http://biz.yahoo.com/prnews/080317/cnm023.html?.v=28)
PR Newswire(Mon 7:00am)

As I repeatedly wrote, SDTH beat its own guidance by a good margin:

«Record net income increased 54.2% to $27.0 million, or $0.50 per diluted share; exceeding guidance of $23.0 million to $24.4 million», or $0.43 per diluted share.

As for 2008 guidance ...

«The Company expects 2008 revenue and net income to be in the range of $132 - $134 million and $33 - $35 million, respectively, for fully diluted earnings per share of $0.62 - $0.65.»

... which is 13.4% above analysts expectations:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44144;image)

The numbers are just a bit shy of my optimistic expectations, since I called for 15 cents EPS in the 4th quarter (and the actual number was $0.14) and for something like $0.65-$0.75 for 2008 guidance, but still the numbers are better than the market's expectations.

I also enjoyed the following information:

«ShengdaTech is in the process of completing the test runs on its three new stainless steel NPCC lines in Xianyang City, Shanxi Province. Each line has 20,000 metric tons production capacity and is expected to ramp up to full capacity by August 2008. The stainless steel lines have a production life of 30 years compared to 10 years for carbon steal lines. In addition, the stainless steel ensures the purity of the NPCC particles enabling the Company to target higher-end markets and international manufacturers. The Company has been successful in developing and commercializing new applications of NPCC for paper and polyethylene manufacturing, and is working on developing new NPCC applications in a variety of markets such as asphalt, automobile paint and silicone-adhesives.»

Asphalt can be huge :)

Everything is on track for SDTH to ramp up its NPCC production capacity to 1,000,000 metric tons in a few years time as it is their plan, up from the current 160,000 metric tons. In my view the company should then be worth about $5 B, up from the current $507 M (I believe the stock is undervalued at this point, trading at 14.7 times 2008 estimated EPS).

I'm not sure if the market will like the numbers or not, or if SDTH's share price will rise or fall (due to a potential multiple contraction) over the next couple of months, but there's good visibility into the company's future growth.

I'll continue holding SDTH for the long term.

Well, it's hard to argue with a 12.5% drop, especially when I had been winning 100% plus in this stock and now have just 21% profit to show :-\

SDTH's technicals deteriorated somewhat, with the stock closing below the $8.5 support level. However, if one is talking long term as I am, the "important" technical indicator is the 200 days moving average and the price remains above that one as you can see on the following chart:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44177;image)

"Wow, that was reassuring", you could comment ;D

Anyway, turning to the fundamentals, SDTH's management was kind to provide a transcript of yesterday's conference call, which you can read here:

SDTH conference call transcript (http://www.sec.gov/Archives/edgar/data/1160165/000114420408015546/0001144204-08-015546-index.htm)

The information provided shows that SDTH's NPCC business is still in its early stages and the best is yet to come. There's little doubt that demand for NPCC will continue to increase as the company keeps adding new costumers. In the Q&A session management said they expect to have 15% of revenue coming from international sources, compared to 1% in 2007.

I wrote one thing wrong yesterday, they currently have just 130,000 metric tons of NPCC production capacity and are expected to add another 60,000 in 2008 and another 60,000 in 2009. The ramping up to the long term objective of 1,000,000 metric tons of capacity may take more time than I initially expected, but I have no doubts that it will happen.

I see this company's earnings growing between 25% and 30% a year for the long term, let's settle at 27.5%, which is the company's target for 2008. The growth rate is 27.5% and the forward p/e is 12.9. This isn't right, the p/e should at least equal the growth rate and SDTH should be trading at $17.46 now. If it weren't for these nasty market conditions ...

Finally, I find SDTH one of the most interesting and promising investments around and I'll continue holding it for the long term, regardless of the share price.

Technically SDTH looks weak, having closed below the $8.5 horizontal support and below the 200 days SMA.

Fundamentally it looks very attractive, being valued at 11.8 times 2008 expected EPS and with a long term growth rate of 27.5%. I find this growth rate very reliable ... the only thing I worry about is the availability of limestone to make NPCC. I think demand is not a risk here.

It appears that "confidence" is a more important factor driving the stock prices over the short and medium term than "value".

How can I measure "confidence"? And should I act when it changes, or ignore it? These questions and their subjectivity make me wonder if I should invest in stocks at all.

I'll keep holding SDTH.

Hi David,

I think I got why SDTH fell 12,5% after earning release.
I carefully read the transcript of conference call and that's what I found:

1) We (SDTH board) can't add capacity to existing sites.
2) The management changed in SECONDS the answer to a simple question from an analyst, who asked: when the new sites will be completed? The Answer: management said they completed the new sites on jul-09, then seconds later moved the deadline to end of 2009, with new revenue coming on 2010.

Is this management reliable?
what do you think?

If they can't add new capacity, as they stated, the 2009 will be flat in grow and that's why stock price is now at 8$ or 9$ and going up and down like a jojo.

Tera

Quote from: terainvestment on March 26, 2008, 06:34:40 PM
Hi David,

I think I got why SDTH fell 12,5% after earning release.
I carefully read the transcript of conference call and that's what I found:

1) We (SDTH board) can't add capacity to existing sites.
2) The management changed in SECONDS the answer to a simple question from an analyst, who asked: when the new sites will be completed? The Answer: management said they completed the new sites on jul-09, then seconds later moved the deadline to end of 2009, with new revenue coming on 2010.

Is this management reliable?
what do you think?

If they can't add new capacity, as they stated, the 2009 will be flat in grow and that's why stock price is now at 8$ or 9$ and going up and down like a jojo.

Tera

Nah, I don't think it was that, SDTH's management is just too conservative. They always give guidance and projections at the worst case scenario. They didn't say they "we can't increase production" at all. I didn't hear that, did you?

SDTH is back above the $8.5 support, so, was that a false technical signal? It appears that it was ... one had to have exceptionally strong hands to hang on to SDTH on that break and I'm glad that I did.

I'll keep holding SDTH for the long term.

SDTH CONFERENCE CALL TRANSCRIPTION (http://seekingalpha.com/article/68878-shengdatech-q4-2007-earnings-call-transcript?source=yahoo&page=1)


Andrew Baswell - NNO Capital

I guess I am talking about any existing buildings. I thought from prior discussions that it was relatively a straight forward proposition. If needed after this additional 60,000 comes on line to add additional lines in there and expand capacity further within that -- those same factors.

Anhui Guo (Interpreted)

So, the existing facility, the existing buildings in Xianyang, the Company could not add anymore new production lines and let's say they built a new buildings on the new land.
-------------
During the call, SDTH affirmed that above. Before of the statements above reported, When they refer to new building, they are referring to the new facility that will be completed on June-09...seconds later, this deadline was moved to December 2009.

I think the CC was a total chaos as per what I read on the transcription ;-)
But I supposed the market understood very well, putting SDTH underwater.
That's why I sold SDTH today and shifted to ASTI.

May be I am wrong, time (as ever) will tell.
Hopefully  :)

QuoteDuring the call, SDTH affirmed that above. Before of the statements above reported, When they refer to new building, they are referring to the new facility that will be completed on June-09...seconds later, this deadline was moved to December 2009.

I think the CC was a total chaos as per what I read on the transcription ;-)

I don't think it was a total chaos, but as you say, there are issues.

It was clear that:

1 - SDTH currently has 130,000 metric tons of annual capacity;
2 - Another 60,000 metric tons came online in March 2008, pushing annual capacity up to 190,000 metric tons;

«In 2007, we added 40,000 metric tons of NPCC capacity bringing our total NPCC capacity to 130,000 metric tons. This month we completed the construction of our first new stainless-steel NPCC lines with 60,000 metric tons of capacity which are scheduled to begin production by the end of the month.»

«We anticipate our new lines will reach full capacity by August of this year, increasing our total annual production capacity to 190,000 metric tons.»

The company is pursuing a further expansion in capacity:

«We are actively exploring potential sites in Shandong Province for the next phase of our NPCC expansion and are currently in negotiations with the local government in Shandong for use of high quality limestone quarry that's located here in the Shandong Province.»

«So as mentioned earlier, if we can begin the construction this August or September the construction can be completed by next July or August.»

The analyst's issue is that production capacity will only rise beyond 190,000 metric tons probably in Q4 2009. He's worried that there won't be growth in 2009 versus 2008 due to production capacity limitations.

This is a valid concern for a medium term investor, but not for a long term investor, because sooner or later, this company will reach 1,000,000 metric tons of annual production capacity of NPCC. Demand is not an issue here.

So, what if 2008 EPS is $0.62 and 2009 EPS is $0.70 ... does it matter all that much if 2010 EPS is $1 or more?

It's going to require patience (a lot more than I initially thought, perhaps because investors now just believe in hard facts and are not paying attention to projections or the future all that much).

A year ago it was possible for a stock to discount the earnings and their projection 3-5 years into the future. This isn't happening now, at least not to the same extent.

Anyway, SDTH continues to be a solid long term investment.

QuoteThat's why I sold SDTH today and shifted to ASTI.

May be I am wrong, time (as ever) will tell.

Time already said your shift was a good move. Congrats :)

Now these guys said they won't increase NPCC production between August 2008 and August 2009 ... just thinking I could have made 100% profit in a couple of months and then put the money to work elsewhere ... it shows me I shouldn't invest for the long term.

It appears the "long term" strategy is much better suited for large caps than small caps. But I'm not sure about this.

There can be news of acquisitions in the chemical sector which may boost SDTH, or else the stock may remain asleep around current levels for a prolonged period of time.

Well, but I'm not going to think that just because the TM Portfolio started well that is the best strategy ...

I'll keep holding SDTH.

Press release out from SDTH:

• ShengdaTech Begins Production on New Stainless Steel NPCC Lines (http://biz.yahoo.com/prnews/080414/cnm011.html?.v=44)
PR Newswire (Mon 8:00am)

Nothing new here. What the market is wary about are the expansion plans after this one. Again, demand is not an issue here, but how fast the company can increase supply.

I remain confident that over the long term everything will play out well, but with the current information investors don't see any growth in production capacity of NPCC between August 08 and August 09. Maybe the price will rise to compensate for the lack of supply.

I'll continue holding SDTH for the long term.

chart looks better now....

cheers
O.

Quote from: la-onda on April 16, 2008, 09:39:02 PM
chart looks better now....

cheers
O.

Yes, SDTH looking better from a technical standpoint, closing just above $9 yesterday:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44981;image)

Let me copy/paste the analysis I have here, from Roth Capital Partners, published after the 4th quarter earnings release:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44983;image)

Q4'07 Results in Line, Guidance Above View

Q4'07 revenue rose 24% yoy to $28.6 million, ahead of our estimate by $1 million. Net income grew 27% yoy $7.8 million, or $0.14 per share, in line with our estimates. For FY2007, revenue rose 39% yoy to $100.7, topping guidance of $98 million. Net income of $27.0 million also beat guidance of $24.4 million.

NPCC revenue rose 47% yoy to $13.8 million, accounting for 48% of total revenue in Q4'07. Strong demand for NPCC products from tire, PVC and latex sectors drive the volume to 35,680 metric tons in Q4'07, in-line with our estimate of 35,292 tons. Tire and PVC remain the two largest sectors for NPCC products, representing 43% and 39% of total NPCC sales respectively.

Gross margin hits record of 35.8%, compared to 33.6% in Q4'06, resulting from higher margins in the chemical segment (29.5% vs. Roth estimate of 27.8%). However, gross margin for NPCC was 42.6%, down 1% sequentially, due to higher depreciation expense, cost of coal and transportation costs.

Management issued FY08 revenue guidance of $132 to $134 million and net income of $33 to $35 million, equivalent to fully-diluted EPS of $0.62 to $0.65. Both top line and bottom line guidance are significantly higher than our estimates of $124 million in revenue and $0.56 in EPS.

SDTH is developing new NPCC application in a variety of markets, including polyethylene, asphalt, automobile paint and silicone adhesives.

Acquisition and capacity expansion under evaluation. Management says it is aggressively evaluating acquisition targets in the chemical business and looking for potential sites in Shangdong province for the next phase of NPCC capacity expansion, possibly in late 2009.

We raise our estimates based on new guidance and assume capacity expansion will take place in Q4'09. We now raise our revenue estimates for FY08 from $124.3 million to $132 million, and EPS estimate from $0.56 to $0.62. We further raise our 2009 revenue estimate from $139.9 million to $149.3 million, while raising our FY09 EPS estimate from $0.63 to $0.67.

Shares appear under valued. Trading under 15x of FY08 estimated EPS, SDTH shares trade at discount to its own growth rate of 23%.

SUMMARY

Financial Results Review and Conference Call Recap

The chemical segment was largely responsible for upside to the quarter. Revenue from this segment reached a record $14.8 million and gross margin climbed to 29.5%, the highest in two years. Despite higher raw material prices, the chemical segment demonstrated strong pricing power customers reacted well to higher prices. Sales of liquid ammonia and methanol increased 9.8% and 8.3% sequentially, more than offsetting the 6.3% decline in sale of ammonia bicarbonate.

On the conference call, management made clear it intends to acquire local chemical enterprise with inefficient operations and distressed value. SDTH targets the same or closely-related business in order for a quick turnaround.

For the NPCC segment, management announced 13 new customers, including five tire manufacturers, three PVC producers, three latex producers, a paint manufacturer and a paper manufacturer. Sales for NPCC's latex application grew 21% yoy, now comprising 10% of total segment sales. Management reiterated that its project phase III in Xianyang is expected to reach full capacity in August 2008. For the additional 60,000 tons of capacity, the Company expects that existing customers will absorb 60-70% of the new capacity.

Management further announced its intention to aggressively pursue international market and expects export sales to reach 10-15% of total sales, from 1% in 2007. It intends to recruit 12 English-speaking sales reps and establish an office overseas in 2009.

Management intends to build a new facility for 60,000 m/t of NPCC in Shangdong province, which is new news to some investors. The Company indicates that the potential site in Shangdong is close to a limestone reserve and will save transportation costs. The site selection also fits into the aggressive export strategy. Management is in the process of negotiating with local government and expects the new facility can be operational as early as August 2009, or by the end of 2009 to be the latest. Capital investment is expected to be RMB400 million, or $57 million at current exchange rates. It implies that SDTH could run at full capacity for 12 to 16 months after the production ramp up in August 2008.

Cash and equivalents declined to $26.4 million as of December 31, 2007, from $41.1 million in the previous quarter. Advances to suppliers jumped from $0.53 million in Q3'07 to $19.4 million at the year-end. We await the 10-K filing for more details.

New Guidance for 2008
FY08 revenue is expected to be in a range from $132 to $134 million and net income in a range from $33 to $35 million, equivalent to fully-diluted EPS of $0.62 to $0.65. Both top line and bottom line guidance are significantly higher than our estimates of $124 million in revenue, $30.6 million in net income, and $0.56 in EPS respectively.

Major Development in NPCC Application
Entering 2008, SDTH announced three major developments in NPCC application.

NPCC use in polyethylene--ShengdaTech announced on February 27 that it has successfully developed a new NPCC product for use in polyethylene (PE) plastic products. We view such development a major breakthrough for the company as it brings NPCC to a new product application whose market potential can be as big as PVC. Recall PVC accounted for 37% of Q3'07 NPCC sales.

PE is a large plastics category widely used for consumer products. Global consumption is expected to be 87.4 million metric tons by 2010, according to Univation Technologies, a technology licensor to the world's PE industry. The use of NPCC in PE products will increase its heat-resistant capability and reduce the quantity of heat of combustion and secondary pollution. It can also enhance the PE's printing quality and surface smoothness, and reduce the amount of PE needed in production, resulting in lower overall cost of raw materials.

Peter's Polyethylene Industries Pte., Ltd., the largest plastic manufacturer in Singapore for litter bins, plastic bags, and office products, will be SDTH's first PE customer, after one year of collaboration. It will initially incorporate NPCC in its plastic barrels for industrial use and polypropylene film.

NPCC use in paper—SDTH announced on January 2 that it developed a new NPCC product, NPCCB-100, for use in surface coating for premium color ink jet paper. The introduction of NPCC is expected to improve paper's whiteness, brightness, smoothness, ink absorption while reducing the amount of kaolin or titanium which is more expensive than NPCC. At this stage, NPCC is primarily used for surface coating in specialty papers.

NPCC use in asphalt--ShengdaTech also announced that it is working with Tongji University, a well-known school in Shanghai for its expertise in construction, for NPCC use for asphalt, and expects to bear fruit in the next two months. In addition, SDTH is developing new NPCC applications in a few new markets such as automobile paint and silicone-adhesives.

While we do not expect a substantial sales volume from these two applications in the near term, we believe it brightens long-term prospect for SDTH's NPCC sales as competition heats up. We anticipate the sale to Peter's Polyethylene to boost SDTH's export business and help to absorb additional capacity as project phase III is completed in March, which may give management more confidence in capacity expansion.

Competition May Heat Up
Growing demand of NPCC has led to continuous capacity expansion in China. According to China Chemical Reporter, a weekly trade publication, total output of nanometer calcium carbonate reached 300,000 metric tons in 2006, compared to less than 100,000 tons in 1999. Demand is estimated at 750,000 tons in 2010.

Similar to SDTH, the industry has expanded NPCC applications from rubber and ink sectors to plastics, coating, adhesives and papermaking sectors. According to China Chemical Industry News (CCIN), rubber accounts for 40% NPCC sales in China, followed by paint and construction (30%), plastics (15%), ink, toothpaste and other chemicals (10%), while paper accounts for 5% of NPCC use. CCIN estimates that 2008 NPCC demand in China will exceed 520,000 metric tons.

We have identified approximately 20 NPCC manufacturers in China, with production capacity ranging from 3,000 tons to 100,000 tons. One of China's first NPCC producers, Guangping Chemical Enterprise has expanded its capacity from 15,000 tons to 50,000 tons. Another NPCC producer, Enping Jiawei Chemical Enterprise announced its completion of a 90,000-ton production line for its Baiyinghua brand NPCC products. The city of Enping, Guangdong province where both manufacturers are located, has planned to double the city's NPCC capacity to 300,000 tons in five years. Other provinces such as Ningxia, Henan, and Guangxi have announced expansion plans. Guofeng Group, a plastics manufacturer in Anhui province, also
announced to install large NPCC production lines.

It is important to note that some of these companies may not directly compete with SDTH due to its application, process and prices. It appears SDTH sells premium quality NPCC versus its competitors, based on its ASP of $380 per ton versus the $122 per ton for average NPCC exports from China in 2006. While a few competitors sell for similar prices, we found more producers selling in the range of $225 to $290 per ton. Our interviews with SDTH customers also confirm that many NPCC producers do not produce nano-grade calcium carbonate despite their claims.

Internationally, we anticipate SDTH may face challenges from several well-established chemical firms including Monsanto (MON-NC-$108.58), Solvay, and Shiraishi. Solvay Chemical & Pharmaceutical Group is a Brussels-based chemical firm, with 29,000 employees in 50 countries and EUR9.6 billion in annual sales. Shiraishi Kogyo Kaisha is a Japanese chemical boutique specializing in calcium carbonate for over a century, with over 300 employees. We believe SDTH will enjoy price advantage over these competitors for the time being.

Business Outlook
In the near term, tire and PVC will remain the two major applications for NPCC products. Recall that foreign brands control 70% of China's passenger tire market. We consider a penetration into any major brand as strong endorsement for ShengdaTech's product quality, which may result in snowball effect.

The tire industry in China faces over capacity and declining gross margin, as a result of export VAT rebate cut and rising production costs, which should play well for good-quality low-cost NPCC producers such as SDTH as tire manufacturers continues to look for ways to improve its tire quality and lower costs. Several international tire makers have indicated a willingness for local procurement, and we have read reports that Hankook Tire of Korea has already purchased carbon black locally while Bridgestone has placed more emphasis on local R&D. Domestic tire manufacturers may grow their business through exports and OEM for global brands in the Chinese market.

Due to a strong pricing environment and increasing concerns of inflation, we expect chemical business to grow at 10% in FY08 and 8% in FY09, which is substantially slower than the NPCC segment. Accounting for 52% of total revenues and 41% of gross profit, a slow-growth chemical segment remains a drag to the firm's overall EPS growth. If the acquisition materializes, the chemical segment will claim an even bigger share of the overall business, particularly at the time when NPCC reaches the full capacity.

VALUATION

Estimates Raised and Basis of Adjustment

We have revised our FY08-09 revenue and EPS estimate based on management guidance, under assumptions of over 100% capacity utilization. We expect the chemical segment to grow 10% in 2008 and 8% in 2009, due to the inflationary environment in China. As a result, we project NPCC sales to account 55% of total sales in 2008 and 57% in 2009.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44985;image)

We maintain our gross margin expectation for NPCC at around 42% for both 2008 and 2009, but we raise our margin estimates for the chemical segment from 25% to 29%, given its strong showing currently and improved production efficiency.

SG&A expenses are expected to increase as a percentage of total revenue as the firm aggressively pursues export market and incurs increasing expenses as a public company.

We raise our estimates based on new guidance and assume capacity expansion will take place in Q4'09. We now raise our revenue estimates for FY08 from $124.3 million to $132 million, and EPS estimate from $0.56 to $0.62. We further raise our 2009 revenue estimate from $139.9 million to $149.3 million, while raising our FY09 EPS estimate from $0.63 to $0.67.

Valuation
Based on approximation of segmental distribution of gross profit between chemical and nano-materials of 41% and 59% respectively, we are able to segregate their individual valuations.

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44986;imagehttp://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=44987;image)

(//)

When comparing to US peer group, the SDTH chemical operation has a higher than average EV/EBITDA and P/E multiple for FY08. For NPCC products, a relatively newly developed segment, P/S multiples are applied to reflect the typical high growth and loss-incurring pattern. We find SDTH's multiple lower on a P/S basis from FY07 to FY09.

RISKS

Inflation and rising commodity costs
The Chinese economy is obviously inflationary. On Mar 11, the National Statistics Bureau has released the Feb 08 CPI hiked to 8.7%, another decade high. Two days earlier, PPI was announced to have jumped to 6.6%. Bank minimum reserve requirement and one-year loan rate is rising alternatively, reaching 15% and 7.46% alternatively. During March, another rise of interest rate is highly expected. However, we consider the inflation primarily driven by meat and grain shortages cannot be reverted in the near term.

Chinese businesses are increasingly challenged with higher financing expenses on top of their rising raw material costs and freight charges, all of which are adversely affecting profitability. In particular for SDTH, it is debt-free, yet is exposed to the rising cost of commodities.

Management's ability to explore new application for NPCC and subsequent market penetration and commercialization
Currently the company's NPCC products are heavily reliant upon the tire industry (43.4% of total NPCC revenue for Q4'07). Recent announcements disclosed potential applications in PE, PVC and even for color ink jet paper.

The company's ongoing growth prospect depends on management's stress on R&D development for additional new applications; as well as marketing efforts in commercializing them. Should it be unsuccessful in penetrating new industries, growth sustainability would be seriously challenged.

Chemical: extra cost on relocation and compliance in stricter governmental mandates for
environmental protection; limited distribution distance
Most of the company's chemical products are flammable, explosive, and dangerous and pose a threat to the health and safety of employees and residents around its facility. Current location of SDTH, which is in the urban area of Tai'an City may result in uncertainties in three-folds:

1) extra cost will arises should relocation deemed necessary
2) extra cost will arises should SDTH is obligated to comply stricter governmental mandates for
environmental protection
3) possible production interruption may happen, should either 1) or 2) incurs

Communication barriers: language ability of management teams
Not having English speakers at senior management level can, from time to time, lead to miscommunication and effectiveness and efficiency interactions with investors.

Personal Comment: All I have to say is "Wow" and "my analysis are far inferior to these, because I don't have the same research tools or time to do them". From now on I'll use this service (Thomson One Analytics) as a support for my fundamental analysis.

Good news out for SDTH:

ShengdaTech Adds Three New Customers, Updates International Market Expansion (http://www.marketwatch.com/news/story/shengdatech-adds-three-new-customers/story.aspx?guid=%7B819BC667%2D2128%2D472B%2D8827%2D0AA05D685F05%7D&dist=TQP_Mod_pressN) - PR Newswire

Management seems to be executing on their international expansion strategy, but again, demand isn't the issue, the problem is capacity production. SDTH is fundamentally attractive at this point, but until there's material information on an expansion of production capacity of NPCC (or news of an acquisition in the chemical segment), I guess SDTH will trade between $7 and $10 or so.

Anyway, I don't see relevant risks and the long term growth story remains intact, I'll keep SDTH in the Main for the long term.

SDTH will report 1st quarter results tomorrow before the open. Analysts are expecting $0.13 EPS on $28.25 M revenue (http://finance.yahoo.com/q/ae?s=sdth). I think the company may very well beat this expectation.

SDTH looks to me at rock bottom valuation, but there isn't a positive catalyst to move it significantly higher at this point. These catalysts could be coming from an acceleration of the expansion plans in terms of NPCC's production capacity or an acquisition in the chemical sector.

We'll see if there's anything material coming out with tomorrow's results and conference call.

I'll hold SDTH through earnings.

QuoteSDTH will report 1st quarter results tomorrow before the open. Analysts are expecting $0.13 EPS on $28.25 M revenue (http://finance.yahoo.com/q/ae?s=sdth). I think the company may very well beat this expectation.

The numbers were released on form 10-Q (http://www.sec.gov/Archives/edgar/data/1160165/000114420408026257/v112853_10q.htm) filed with the SEC (no press release, at least, not yet).

The company beat expectations on revenue and EPS. Revenue for the quarter was $28.55 M and EPS was $0.14.

It's interesting to note that, if EPS were calculated using "comprehensive income", that is, taking into account gains due to changes in exchange rates, EPS would then be $0.21.

Even though the company had positive net income of $7.4 M, cash and equivalents decreased because the company invested $23.3 M in "purchase of property and equipment and construction in progress".

Overall I believe results were good, with EPS up 40% from a year ago.

The conference call begins within 7 minutes. I'll listen to the replay later and will post what analysts have to say about it.

Everything seems on track with SDTH, I'll keep holding for the long term.

Some more "food"


ShengdaTech reports Q1 EPS of $0.14 vs $0.13 single est; revs rose 28% YoY to $28.6 mln vs $28.25 mln single est (8.12 ) 

''Demand for our NPCC and chemical products remains strong. We will continue growing our NPCC business by expanding capacity, developing new, higher-end applications and by continuing to market our proven value proposition to increase penetration in our domestic market, while significantly expanding our international sales... We are aggressively evaluating acquisition candidates in the coal-based chemical business and exploring potential sites in eastern China for the next phase of our NPCC expansion. Our new facility will be in close proximity to a high-quality limestone quarry in order to produce high-quality NPCC products while reducing raw material cost. The new facility will also be close to a sea harbor which facilitates our exports.'' 

Buy recommendation just out for SDTH. Merriman Curhan Ford sets price target at $14-$17. I've attached the full 16 pages report below.

Two positive highlights:

«Closer Location to Raw Material Supply Improves Profitability

ShengdaTech's new factory location in Shaanxi Province is very close, within 20 kilometers, to one of the best sources of limestone in China, which reduces the transportation cost of this major raw material. Raw materials account for around 60% (including packaging materials) of the cost of goods sold of NPCCs, with the two primary contributors being limestone and anthracite (a hard coal). Further costs include electricity at 16% and fuel at 12% with labor at around 4% and depreciation at around 9%. Limestone currently costs approximately $11 per ton in Shandong Province near the company's older 30,000 ton manufacturing facility. However, at the company's new NPCC manufacturing location in Xianyang City, Shaanxi Province, it only costs around $6.50 a ton, or 41% cheaper because this facility is located much closer to the highest quality limestone mine in China. The difference in price is driven by the transportation costs of the limestone from one province to the other. Having a larger manufacturing facility closer to the source of limestone should help the company improve gross margins or provide the pricing flexibility to expand current markets and enter new markets.

The company is adding capacity in chunks of 40,000-60,000 tons at a time, which equates to approximately $16-24 million revenue increments using the current ASP of around $400 per ton. However, the company assumes a 300-day working year and can easily flex capacity 15-20% higher than the stated total capacity.»

I see SDTH transforms 1 ton of limestone costing $6.5 into 1 ton of NPCC it sells for $400 (of course, there are other costs, but ...). This is the first time someone comes up with this information of the 300 working day ... SDTH can increase NPCC production capacity by 15-20% even without new lines of production. It just needs workers for more days and work is just 4% of the company's total costs, meaning it wouldn't cost much to do this.

SDTH should have a good day today ... I'll keep holding for the long term.

QuoteSDTH should have a good day today ...

Indeed, investors were inspired by the analysis published yesterday and pushed the stock higher by 9.7%.

Cool :)

nice chart action today  >:D

SDTH: Short Interest UP 4.1% to 3.1M at the End of Apr 2008
Monday , May 12, 2008 06:00ET

According to new short interest data from NASDAQ, short interest for ShengdaTech, Inc. (NasdaqNM: SDTH) INCREASED 4.1% to 3,055,268 shares as reported at month-end April, 2008.
Based on SDTH's 20-day average daily share volume of 410,445, it would require approximately 8 day(s) of buying to cover this short interest.

Need a close above $10

    Are these guys diluting on us yet again??...

ShengdaTech Announces Proposed Offering of $100 Million Convertible Senior Notes

TAI'AN CITY, Shandong, China, May 14 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech Inc. (''ShengdaTech'') (Nasdaq: SDTH - News) a leading manufacturer of nano precipitated calcium carbonate (NPCC) in the People's Republic of China (PRC) and a major manufacturer of coal-based chemical products in Tai'an City, Shandong Province, PRC, today announced that it intends, subject to market and other conditions, to offer an aggregate of $100 million of senior convertible notes due 2018, in an offering to qualified institutional buyers pursuant to Rule 144A under the United States Securities Act of 1933, as amended (the ''Securities Act''). The notes will bear interest and be convertible into shares of ShengdaTech's common stock at terms and a conversion price to be determined at the time of pricing of the offering. ShengdaTech intends to grant to the initial purchasers a 30-day option to purchase up to an additional $15.0 million of the notes to cover over-allotments, if any.
ADVERTISEMENT


ShengdaTech currently expects to use approximately $56 million of the net proceeds from the offering of the notes to expand its NPCC production capacity. ShengdaTech plans to use the remaining proceeds for potential coal-based chemical acquisitions, strategic investments and to fund working capital requirements.

The convertible senior notes and ShengdaTech's common shares issuable upon conversion of the notes will not be registered under the Securities Act or the securities laws of any other jurisdiction. ShengdaTech will be obligated to file a shelf registration statement under the Securities Act for resale of the notes and the common shares issuable upon conversion if the notes and common shares issuable upon conversion are not eligible for sale under Rule 144 beginning 180 days after issuance. Unless they are registered, these notes may be offered or sold only in transactions that are exempt from registration under the Securities Act and the securities laws of any other jurisdiction.

Update:

New developments concerning the convertible notes:
- ShengdaTech Prices $100 Million Convertible Senior Notes (http://biz.yahoo.com/prnews/080522/cnth031.html?.v=12)

Quote(...) today announced the pricing of $100 million of 6.00% senior convertible notes due 2018, in an offering to qualified institutional buyers pursuant to Rule 144A under the United States Securities Act of 1933, as amended (the ''Securities Act''). ShengdaTech also granted to the initial purchasers a 30-day option to purchase up to an additional $15.0 million of the notes to cover over-allotments, if any. The notes will pay cash interest semiannually at a rate of 6.00% per annum and will be convertible into shares of ShengdaTech's common stock at a conversion rate of 100.6036 per $1,000 principal amount of the notes (which represents a conversion price of approximately $9.94 per share). The sale of the notes is expected to close on May 28, 2008(...)

This new offering is not good news, and will affect new estimate ratios on a negative way, but even so not «thesis changing» from a Fundamental point of view. SDTH is trading at discount and even with implied dilution on a scale of 1/5 the stock is still attractive.

From a technical analysis perspective, the last few days were very volatile, first because of this bad news, then because of the broad market selling. Even so, SDTH continues to trade inside the same pattern, current support approximately at $7.75.

Trading Plan:
HOLD SDTH

Update:

Q1 results were out:
- SHENGDATECH, INC. Financials (http://finance.yahoo.com/q/is?s=sdth)
- Shengdatech Inc. Q1 2008 Earnings Call Transcript (http://seekingalpha.com/article/79054-shengdatech-inc-q1-2008-earnings-call-transcript?source=yahoo)

QuoteNet income in the first quarter of 2008 was $7.4 million, up 37.1% from $5.4 million in the same period a year ago.
Fully diluted earnings per share for the first quarter of 2008 were $0.14 compared to $0.10 in the same period last year.

Compared with Q4-2007, revenues were flat and net income had a slightly decrease, but the same happened last year and the year before, so I think it could be something seasonable.
Results were inside the estimates range, from my source I only see 2 research departments covering SDTH, Roth Capital expecting a $0.14 EPS and Merriman expecting a $0.16 EPS, so no big surprises.

From a technical perspective, SDTH is inside an ascending range and trading near the support level right now. It is important that the stock holds above $7.75 otherwise it may compromise the current layout, so the current level is important to watch.
I'll be setting a stop level just slightly below the most recent low.

Trading Plan:
HOLD SDTH with a stop @ $7.40

Update:

Just a quick chart update: SDTH reacted positively on the support of the current ascending channel.
Trading plan remains:

Trading Plan:
HOLD SDTH with a stop @ $7.40

Update:

Today a new research note was released, published by Global Hunter Securities:

Download full 17 pages note:

(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45958;image) (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=45960)

This is an initiating coverage note with a BUY rating and $11.50 price target. Analysts at GHS estimate $0.71 EPS for 2009 (11.2x P/E) which is in accordance to current reuters consensus for the same period.

Just a quick chart update: SDTH keeps trading inside the channel, but it’s once again near the base (support). The Trading plan remains:

Trading Plan:
HOLD SDTH with a stop @ $7.40

Update:

Just a quick chart update: SDTH is still trading inside the ascending channel. Taking into consideration the Friday's general market behavior, SDTH managed to hold this technical layout pretty well.

Trading plan remains:

Trading Plan:
HOLD SDTH with a stop @ $7.40

Update:

SDTH managed once again to stay inside the ascending channel despite the turbulent market behavior. It is important that SDTH holds this key levels in order for us to keep this position.

Analysts at Roth Capital have initiated coverage on SDTH and published a Research Note:

See complete Note Pdf:
(http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=46058;image) (http://www.3stocksonfire.org/trading/index.php?action=dlattach;attach=46059)

They started with BUY rating and a $11 Price Target, even so their approach is quite conservative while they estimate a $0.63 EPS for 2009 (compared with current Reuters consensus of $0.705 for the same period).

In this note the analysts made the following comments on Q1’08 results:

QuoteQ1'08 results outperformed our estimates. SDTH reported Q1'08 results
prior to the $100 million financing, with both top and bottom lines topping our
estimates. Q1'08 revenue rose 29% yoy to $28.6 million, beating our
estimate of $28.3 million. Net income grew 37% yoy to $7.4 million, or $0.14
per share, compared to our estimates of $7.1 million or $0.13 respectively.
Fertilizer prices continue to climb and break records, making the chemical
segment a major catalyst for upside surprise in FY08. We expect further
gross margin expansion in this segment.

Visit to Shanghai R&D center gives us confidence in the firm's
capability in product development. We recently visited SDTH's R&D
center in Shanghai and met with Dr. Zhude Xu, the head of R&D. Based on
our discussions, we believe SDTH has a strong pipeline of product
development.

Acquisition and capacity expansion are under evaluation. Management
indicates that it is at the final stage of acquisition process of a local chemical
business and plans to expand NPCC capacity in Shandong province, with a
target date of production in Q3'09.

Adjusting estimates. We are raising our revenue estimate for FY08 from
$132.1 million to $135.7 million, but lowering our EPS estimate from $0.62 to
$0.59. We are further raising our 2009 revenue estimate from $149.3 million
to $160.7 million, while lowering our FY09 EPS estimate from $0.67 to $0.63.
We expect the interest expenses and related amortization of financing cost to
impact FY08 and FY09 EPS by $0.08 and $0.13, respectively, partially offset
by increased sales and margin expansion from the chemical segment. Our
estimates do not incorporate the impact of pending acquisition, which
we believe could be accretive.

Introducing BUY rating and $11 price target. We are introducing a BUY
rating and $11 price target on shares of SDTH (previously NR and no PT).

We’re staying with the same plan:

Trading Plan:
HOLD SDTH with a stop @ $7.40

Interesting developments:

- ShengdaTech Outlines Plan to Acquire State-owned Chemical Company and Relocate Existing Chemical Operations (http://biz.yahoo.com/prnews/080620/cnf025.html?.v=11)

SDTH up +11%

Update:

SDTH jumped 16% last Friday, reacting to exciting news.

Roth Capital research department issued the following comments, reaffirming their $11 price target for SDTH:

Quote
ShengdaTech | SDTH - $8.26 - NASDAQ | Buy

SDTH identifies acquisition target, announces
relocation of chemical operation
ShengdaTech announced this morning that it intends to acquire Jinan
Fertilizer Co., Ltd, a nitrogenous fertilizer company based in Jinan,
the capital city of Shandong province that is approximately 50 miles
away from Tai'an city where SDTH's current chemical facility is
located. Meanwhile, the Company announced that it received a
relocation notice for its chemical fertilizer facility in Tai'an city from the
city government on June 16, 2008.

Acquisition will substantially increase revenue from chemical
segment. The announcement confirms our expectation that SDTH
would acquire a similar chemical business in its neighborhood to
serve both purposes of capacity expansion and facility relocation.
Jinan Fertilizer is a mid-sized nitrogenous fertilizer manufacturer with
seven subsidiaries and 1,800 employees. Its product profile is very
comparable to what SDTH chemical is offering, which includes
concentrated nitric acid, synthetic ammonia, methanol, fertilizer and
carbon dioxide, compound fertilizer, liquid fertilizer, and polywoven
sacks. Management has not given an indication of its price tag, but
expects that the new chemical segment could yield an annual sales
three times the current chemical revenue with similar or higher gross
margin, which translates to approximately $160 million revenue and
30% gross margin. Assuming similar operating expenses, we expect
such acquisition could yield approximately $20 million additional net
income to SDTH's bottom line.

Management by affiliate shall ensure a smooth transition and
accretion. Based on our knowledge, Jinan Fertilizer is a failed
state-owned enterprise due to lack of capital and employee
motivation (we learned that many employees haven't received their
salaries for six months). SDTH's affiliate or former-parent company
prior to public listing, Shengda Group, has gained control of the
business and paid all back wages to employees of Jinan Fertilizer.
Production has resumed and employee morale has rebounded.
SDTH management expects the acquisition to be completed by
November 1, 2008, the same date that SDTH must cease chemical
operation at its current facility in Tai'an city.

Relocation expenses and loss of revenue could be
compensated. We expect the relocation of current chemical facility
may disrupt chemical production for one to two months, which means
SDTH will lose $5 to $10 million revenue between late Q3 and early
Q4 and incur some relocation expenses. However, we believe the
additional revenue contribution from Jinan Fertilizer could more than
offset the loss of Tai'an revenue, depending upon the timing of
acquisition. We also believe local government will somewhat
subsidize the company in form of tax incentive or one-time
compensation, given the fact that SDTH is an important player in
local economy as well as its long-established relationship with the city
government.

We maintain Buy rating and $11 price target with upward bias.
We are waiting for further details about the acquisition to revise our
quarterly estimates and related price target. However, we believe
such acquisition will be substantially accretive to FY09 earnings and
helpful to FY08 EPS. Our price target is based on 16x EPS for the
chemical business pre-acquisition and 6x sales for the NPCC
business.

VALUATION
Our $11 price target is based on peer group multiples applied to each of SDTH's business segments(assuming a diluted share count of 65.9 million) based on a sum of the parts, including 16x EPS for the chemical business and 6x sales for the NPCC business.

RISKS

Share Dilution and share price upside. We believe the conversion price of $9.94 serves the major hurdle for SDTH's share performance. Without a clear picture of chemical acquisition and updated management guidance, investors will be more concerned with the adverse impact of the $100 million debt financing, namely interest expense and dilution.
Inflation and rising commodity costs.  (…)
Management's ability to explore new application for NPCC and subsequent market penetration and commercialization. (…)

Friday’s candle was huge, complemented with the heaviest volume watched in 2008 so far. Despite any fundamental developments, we can spot several resistance levels near the current price:
-   $10 (May’s highs)
-   $10.40 (top of the current channel)
-   $11.35 (descending resistance)

We are introducing a sell limit order and also upgrading our stop level, so the new trading plan is:

Trading Plan:
Sell SDTH @ $10.25 stop @ $8.40

Update:

We missed our exit price for only 6 ticks, SDTH printed an intraday high of $10.19 and then started to drop for the rest of the session, consolidating the previous big white candle.

We'll keep the same plan for now:

Trading Plan:
Sell SDTH @ $10.25 stop @ $8.40

Update:

After another down session like this I felt really bad for setting the sell at $10.25... initially I always had the $10 as the exit level inside my head, but a few days ago while posting the update I decided to change this to $10.25, just because I knew that SDTH would cross the $10 barrier and go a little above it...

Anyway, there are also negative catalysts in play (relocation costs, etc), and technically if GIGM fails to go up right now and test the resistance level the layout becomes weak. We are keeping the same stop level, even if we are a few ticks of being stopped out of this position.

Trading Plan:
Sell SDTH @ $10 stop @ $8.40

Update:

SDTH reacted positively near both the 200EMA and 50EMA.

Today, Roth Capital analysts published a new research note, adding a $13 price target to SDTH (see the attached pdf note)

We're keeping the same plan:

Trading Plan:
Sell SDTH @ $10 stop @ $8.40

Update:

SDTH showed a lot of relative strength during yesterday's session, closing up more than 2% while the general market was deeply down. We'll keep the same plan, trying to sell SDTH at the top of the current range.

Trading Plan:
Sell SDTH @ $10 stop @ $8.40

Sold SDTH @ $10.00

Quick Analysis:

SDTH continues to trade inside an ascending channel, generating consecutive higher highs and higher lows. Fundamental prospects remain interesting, and we'll be buying it if it approaches the lower end of the channel.

Standby Trading Plan:
Buy SDTH below $9.00.

Update:

SDTH is now close to our desired entry spot: the lower end of the channel. The standby trading plan remains:

Standby Trading Plan:
Buy SDTH below $9.00.

SDTH bought today @ $8.95 for the Diversified Portfolio.

nice entering Rams  8)

SDTH update:
SDTH: Short Interest DN 5.0% to 4.3M in Mid Aug 2008
Tuesday , August 26, 2008 16:22ET

According to new short interest data from NASDAQ, short interest for ShengdaTech, Inc. (NasdaqNM: SDTH) DECREASED 5.0% to 4,250,107 shares as reported in mid-August, 2008.
Based on SDTH's 20-day average daily share volume of 278,070, it would require approximately 16 day(s) of buying to cover this short interest.

profile:
http://www.shengdatechinc.com/files/pdf/06-30-08-SDTH-profile.pdf

chart:

Update:

Technicals:
- Ascending Channel In-Play since March, bottom (support) at 8.75 and top (resistance) at 11.50
- Mid term Descending Resistance at 10.20
- Bullish setup on 50-ema and 200-ema
- Long term bullish, mid term neutral, short term bullish

Fundamentals:
Current EPS estimates consensus for 2008FY is 0.63 and 2009FY 0.82, making SDTH to trade at just 11.7 times earnings at current price while the sector trades with the same multiple at 16.5, this gives some backup on upside potential, in other words, SDTH is «cheap» according to current estimates (which been raised recently by 3 research departments).

Comment:
Our entry point was nice, a few ticks above the intermediate low and essentially near the bottom of the channel as we planned. SDTH reacted immediately to this support zone and showed relative strength against a volatile market like todays.
The main goal of this trade is to trade this ascending channel, and try to sell near the upper end of it (above $11), our main concern is the middle of the pattern where the descending resistance is crossing right now (10.20), so for those who want to lock some profits selling between $9.80 and $10.20 maybe a reasonable option, for now we'll keep the main goal on the table (but we may change it), our current trading plan is:

Trading Plan:
Sell SDTH above $10.75 stop @ $8.50

Update:
During Friday's intraday selloff, SDTH tested one more time the lower end of the channel, but reacted positively. No reason for not trusting the current pattern, the plan remains the same for now:

Trading Plan:
Sell SDTH above $10.75 stop @ $8.50

Update:
SDTH is testing the lower limits of our ascending channel, if it breaks it down we'll be out of it.

Trading Plan:
Sell SDTH above $10.75 stop @ $8.50

SDTH stopped at $8.50

 :'( this market sucks....

SDTH: Brean Murray Starts @ Buy; Sets Tgt @ $11; Analyst Notes
Tuesday , September 09, 2008 08:29ET
Issuer: ShengdaTech, Inc. (NasdaqNM: SDTH)
Analyst Firm:  Brean Murray
Ratings Action: INITIATE
Current Rating: Buy
Target Price Action: INITIATE
Target Price: $11.00
Analyst Comments: The firm expects SDTH to benefit from growth in China's industrial economy and urbanization.

ShengdaTech Updates Timing of Jinan Fertilizer Acquisition and Relocation of Chemical Facility
Monday , September 29, 2008 09:00ET

TAI'AN, China, Sept. 29 /Xinhua-PRNewswire-FirstCall/ -- ShengdaTech, Inc. ("ShengdaTech" or "the Company") (Nasdaq: SDTH) a leading manufacturer of nano precipitated calcium carbonate (NPCC) in the People's Republic of China (PRC) and a major manufacturer of coal-based chemical products in Tai'an City, Shandong Province, PRC, today announced that the Company expects to close the acquisition of Jinan Fertilizer Co., Ltd., ("Jinan Fertilizer") before the local government's mandated closing of its chemical facility in Tai'an City on October 31, 2008.

"Our affiliate, Shandong Shengda Technology Co., Ltd ("Shengda Group"), is currently in negotiations with the Jinan City government on the final terms of the acquisition. We are pleased with the progress being made and, per our purchase option agreement with Shengda Group, we expect to finalize the acquisition from Shengda Group before October 31, 2008," commented Mr. Xiangzhi Chen, President and CEO of ShengdaTech. "In the unlikely event that the acquisition is not completed by the relocation deadline, we plan to continue production by renting production facilities from Jinan Fertilizer and its subsidiaries. Although Jinan Fertilizer's product portfolio is somewhat different from our current product portfolio, we do not expect that this will have an impact on our revenue and earnings. We will be producing Jinan Fertilizer's product portfolio and benefiting from the high gross margin of Nitric Acid, a major product produced by Jinan Fertilizer, which has a high sales price. Should this interim step become necessary, we expect a smooth transition process from renting production to ownership," added Mr. Chen.

At its annual meeting of shareholders on September 15, 2008, the Company communicated that it was reasonably confident it would receive an extension from the local government to continue operating its chemical facility beyond October 31, 2008. However, as a result of the recent mining accidents and food safety issues in China, the Chinese government has tightened enforcement of environmental restrictions and workplace safety standards. Therefore, ShengdaTech no longer believes it will receive an extension and that it will be required to cease operations at the facility on November 1, 2008, as previously announced.

The Tai'an facility is not in violation of any safety regulations. Rather, the relocation notice is part of China's environmental law enforcement reform and was due to the facility's close proximity to residential and non- manufacturing business properties. The Company plans to relocate its chemical operations to Jinan Fertilizer's facility upon completion of the acquisition.

Update:

Following the Market Comment (http://www.3stocksonfire.org/trading/index.php?topic=10059.msg118197#msg118197) published today, we're opening a position in SDTH today.

Not long ago, I considered SDTH cheap near $9.00, now below $4.50 the stock is trading at just 7 times 2008e earnings, but taking the current market environment in consideration the fundamentals are not a solid motivation anymore. On a rebound scenario I would expect SDTH to reach at least it's 50-ema which stands near $7.

Trading Plan:
Buy SDTH today (10% exposure), we'll be setting a stop near yesterday's lows.

Update:

Positive developments in SDTH chart, but still inside current trading range. I'm setting a suggested stop level for now.


Trading Plan:
Hold SDTH with suggested stop near $3.65

ShengdaTech Inc.
Wednesday, October 22, 2008 07:10ET

Oct 22, 2008 (Zacks Investment Research via COMTEX) -- ShengdaTech Inc. (SDTH) has that rare combination of strong growth and value characteristics. The stock is cheap. It trades at only 6.4x forward earnings and yet earnings are expected to grow 20.67% over the next 5 years.


Company Description

ShengdaTech manufactures nano precipitated calcium carbonate (NPCC) and coal-based chemicals. The company also converts limestone into NPCC using proprietary technology. NPCC is used in tires, paints, and polyvinyl chloride building materials. The coal-based chemical products include ammonium bicarbonate, liquid ammonia, methanol and melamine.

ShengdaTech's coal-based products are used in chemical fertilizers and raw materials in the production of organic and inorganic chemical products, especially formaldehyde and pesticides.

Acquisition of Jinan Fertilizer Company

In September, the company announced that it expects to close on the acquisition of Jinan Fertilizer Company before Oct 31 because ShengdaTech is under government mandate to close its Tai'an City facility by that same date. ShengdaTech is transferring production from the closing facility to the Jinan facilities.

In the event that the acquisition is not completed by the date the government closes the Tai'an facility, the company said it intends to continue production by renting facilities from Jinan Fertilizer and expects a smooth transition from renting production to ownership.

The company has stated that the government's closing of the Tai'an facility was not the result of any safety violations but was due to China's increased environmental enforcement reform as a result of food safety scares and the facility's nearby proximity to residential and non-manufacturing areas.

Revenue Jumped 75.7% in the Second Quarter

On Aug 15, ShengdaTech reported second-quarter earnings that beat Wall Street estimates by 28.57%. Net income rose 66.3% to $10 million, or 18 cents, from $6 million, or 11 cents in the second quarter of 2007.

Revenues surged 75.7% to $39.8 million from $22.7 million in the year ago period. The company attributed the growth to higher selling prices and increased demand for both chemical and NPCC products.

ShengdaTech added 3 new stainless steel NPCC production lines in April 2008 which boosted NPCC production capacity to 190,000 metric tons compared to 90,000 metric tons from a year ago. The increase in production boosted revenue from NPCC products by 76.4% to $19.1 million from $10.8 million in 2007.

During the second quarter, the company added 6 new domestic clients as well as expanded its international reach by adding a Korean tire manufacturer, Vietnamese and Israeli polyethylene manufacturers and a Singapore automobile undercoating company to its customer list.

Full Year 2008 Estimates Rise

Consensus estimates for the third quarter have been stable in the past 90 days, holding at 15 cents per share. Consensus estimates for the full year are up 4 cents to 64 cents in the last 3 months.

ShengdaTech reports third-quarter earnings on Nov 17. It has surprised on estimates 3 out of the last 4 quarters by an average of 21.18%.

Value Fundamentals

ShengdaTech is an attractive value play, with a forward P/E of 6.49. Its price-to-book is 2.45. The company has an outstanding 1-year return on equity (ROE) of 34.66%.

SDTH: Short Interest DN 20.4% to 3.5M in Mid Oct 2008
Friday , October 24, 2008 16:21ET

According to new short interest data from NASDAQ, short interest for ShengdaTech, Inc. (NasdaqNM: SDTH) DECREASED 20.4% to 3,453,896 shares as reported in mid-October, 2008.
Based on SDTH's 20-day average daily share volume of 488,090, it would require approximately 8 day(s) of buying to cover this short interest.

&

ShengdaTech Inc breaks ground at NPCC facility in Zibo, China
Tuesday , October 28, 2008 06:30ET

Oct 28, 2008 (M2 EQUITYBITES via COMTEX) -- ShengdaTech Inc (Nasdaq: SDTH), a manufacturer of nano precipitated calcium carbonate and coal-based chemical products, said on 27 October that the company has broken ground on its new NPCC (nano precipitated calcium carbonate) facility in Zibo and has commenced construction.

The Zibo facility will have a revised total designed capacity of 160,000 metric tons (MT). In addition, the 58 acre land has room for additional capacity expansion in the future. The first phase will have total capacity of 60,000 metric tons (MT) and is expected to begin production in July 2009. A The company said it will reassess the demand/supply situation at the start date for the second phase of expansion (60,000 MT).

&

SDTH: Jumps +9.07%; Vol +131%; Last 90 Min of Trading
Tuesday , October 28, 2008 16:23ET

During the last 90 minutes of today's session, shares of ShengdaTech, Inc. (NasdaqNM: SDTH) demonstrated a strong UPWARD close relative to its 13:30 ET statistics. "Strong Closers" are determined by proprietary Knobias calculations performed during the last segment of each trading day.

sym: SDTH      @13:30 ET        @CLOSE      % CHANGE
----------   -----------   -----------  ------------
PRICE              $4.30         $4.69        +9.07%
VOLUME           111,344       257,051      +130.86%
#TRADES              532         1,171      +120.11%
DAY-HI             $4.49         $4.71       LATE-HI
DAY-LO             $4.01         $4.01           N/A

Dear 3StocksonFire,

Almost a week since the last update, in both portfolios in this market enviroment is pathetic. No updates on anything. Not even general market updates. If the site was free I wouldn't complain, but if you are charging money, you really need to update your subscribers.

Hi Ramsburg and Aussie:

  I support eggman and on his request for an update. I am still paying in hopes that things will turn around for better in the economy and the trading. But as of August, I haven't bought or sold anything and feel like I receive no guidance. I believe no trading on fundamental values exists in today's conditions, so shouldn't we capitalize on fluctuations as we choose? If that's the case, then prompt updates are needed to be able to react in time.

Thanks.
Berloga.

Actually it's bben alomst 2 weeks since the last update, with the market as volitle as it is, it really is unacceptable not to have any updates. I beginning to wonder if they are following the markets anymore.

Quote from: realcoolhead on November 11, 2008, 06:54:16 PM
Amazing you guys are still hoping. I posted my request 4 months ago (the post was deleted promptly) and I concluded that my pre-paid subscription fee was lost already.

These guys are crooks. Had they been in US I would have initiated small-claim lawsuit long time ago. But since they are "hiding" outside US I had no recourse.

Actually this website used to pretty good, I think the guys who currently run went belly up in this market at stop caring.

One of the 4 stocks presently active in this portfolio.

Updated chart look...

Sold @ $6.67 mp for both portfolios.

Reasons: this stock doesn't fit the current portfolio strategy, and it's currently near the resistance.